NOVEMBER 7, 2025

Today’s policy update begins with the latest on the federal government shutdown, which is now the longest one in U.S. history. We share the latest on actions from the U.S. Department of Agriculture to restore partial SNAP benefits. And we provide details of a new lawsuit challenging the U.S. Department of Education’s final rule that could exclude some nonprofits from being eligible employers for the Public Service Loan Forgiveness program.

The federal government shutdown – now in its 38^th day – officially became the longest in United States history this week, as Congress and the White House remain unable to reach an agreement on appropriations legislation for the current federal fiscal year. Last month, the U.S. House of Representatives approved a “clean” continuing resolution (H.R. 5371) that would extend federal funding through November 21. The bill needs 60 votes to pass the Senate. The Senate has rejected the bill 14 times in the past six weeks. The passage of that continuing resolution is quickly becoming a moot point. Even if the Senate passed it today (which remains unlikely), Congress would need to pass another continuing resolution in the next two weeks to prevent another government shutdown.

Most Senate Democrats have opposed the temporary spending bill for three reasons:

With the end date for the House-passed (but Senate-rejected) continuing resolution approaching soon, leaders in Congress are beginning to negotiate the details of a new continuing resolution that could extend into January or February of 2026 and could potentially include full-year funding for some parts of the federal government (where there is broad bipartisan agreement in both chambers of Congress). The U.S. Senate is expected to vote today on an amended continuing resolution that would extend into sometime in early 2026 and would likely fund some parts of the federal government for the full fiscal year (through September 30, 2026). In the unlikely chance that this amended continuing resolution passes the Senate today or in the near future, the U.S. House of Representatives would also need to approve it to end the shutdown.

As noted in the next item, funding ran out last week for the Supplemental Nutrition Assistance Program (SNAP), and funding has also expired for many Head Start programs and for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) program. In addition, the Federal Aviation Administration is cutting services today at 40 major airports – including Charlotte Douglas Airport and many destinations served by other North Carolina airports –potentially creating travel challenges for millions of Americans. Let us know if your nonprofit and/or the people your serve have been affected by the month-long federal government shutdown. 

As a result of the government shutdown, federal funding for the Supplemental Nutrition Assistance Program (SNAP) ended on October 31, meaning that 1.4 million North Carolinians lost their federal food assistance benefits at the end of last week. Last Saturday, a federal court in Rhode Island ordered the U.S. Department of Agriculture (USDA) to use $6 billion in available contingency funding to provide partial SNAP benefits for November and to find other available funding to provide full SNAP benefits during November. This week, USDA responded to the court order by working to reinstate partial SNAP benefits for November, although SNAP recipients are experiencing delays and reduced benefits this week. Late yesterday, in request to a follow-up petition from the plaintiffs, the court issued a second order directing USDA to provide full, rather than partial benefits for the month of November and to make payments to states for these benefits by today. The U.S. Department of Justice last night indicated that it will appeal the latest court order, creating greater uncertainty about when and how much SNAP benefits will be available this month.

In the meantime, a wide variety of nonprofits have had to cover significant additional food assistance needs for North Carolinians who typically rely on SNAP. Last Thursday, Governor Josh Stein announced that the state of North Carolina and a variety of businesses and foundations have made $18 million in emergency contributions to the state’s nonprofit food banks to help with the increased need for nonprofit food assistance. While this emergency support from the state and from private philanthropy is a big help, it still does not cover the totality of the increased demand for food assistance from food banks and many other nonprofits providing food assistance to people in communities throughout the state.

On Monday, a group of nonprofits, local governments, and associations of public service workers filed a lawsuit in federal court in Massachusetts alleging that the U.S. Department of Education violated the federal Administrative Procedures Act in its final rule on eligibility for the Public Service Loan Forgiveness Program (PSLF). Under PSLF, student loan borrowers who work in public service jobs – including positions with 501(c)(3) nonprofits – for 10 years while paying off their student loans are eligible to have the remainder of their federal student loans forgiven. PSLF has enabled many young professionals to afford careers in the nonprofit sector.

The final rule excludes employers – potentially including some 501(c)(3) nonprofits – from being eligible employers for PSLF if they are engaged in “substantial illegal purposes.” The final regulations define “substantial illegal purposes” to include:

Under the final rule, which takes effect on July 1, 2026 and only applies to “illegal” activities of nonprofits taking place on or after that date, the Secretary of Education will have the authority to determine “by a preponderance of the evidence” that an otherwise eligible nonprofit has engaged in activities that have a substantial illegal purpose with only minimal due process for the nonprofit. Once a nonprofit has been deemed to have engaged in activities that have a substantial illegal purpose, it will remain an ineligible employer for PSLF for at least 10 years. The final rule also requires that nonprofits must certify in their application to be a PSLF-eligible employer that they do not participate in activities that have a substantial illegal purpose, which may be difficult and unclear for staff to determine if the organization provides services in certain mission areas or to particular populations.

In September, the Center submitted public comments (along with nearly 14,000 other organizations and individuals) highlighting the importance of PSLF to North Carolina nonprofits, their employees, and their communities and providing 10 suggestions for ways the Department could improve its proposal in the final rule. Unfortunately, the final rule largely ignored or disregarded most of the Center’s suggestions, along with the feedback from most of the other public comments.

For more information about the final rule, the Center’s concerns about it, and its potential impact on nonprofits, check out the Center’s analysis of the final rule.

The newly-filed lawsuit asks the court to declare the final rule unlawful and unconstitutional and to issue an injunction preventing the Department from implementing or enforcing the rule. Following the U.S. Supreme Court’s ruling from earlier this year in Trump v. CASA, the court likely only has authority to issue an injunction stopping the Department from implementing or enforcing the rule against the plaintiffs to the lawsuit rather than issuing a universal or nationwide injunction.  Because the National Council of Nonprofits (NCN) is a plaintiff in the lawsuit, and all Center members are also members of NCN, it is possible that a court injunction could protect Center members. 

The Center will continue to provide updates on the status of this litigation, as well as compliance guidance for nonprofits to consider between now and July 1, 2026 in the event that the lawsuit is not ultimately successful in stopping the implementation of the final rule.

Yesterday, Governor Stein called for the NC General Assembly to have a special session beginning the afternoon of November 17 to address Medicaid funding. Lawmakers were already scheduled to have a four-day mini-session on November 17-20, but legislative leaders had previously indicated that they did not anticipate holding votes during that week. 

On October 1, the NC Department of Health and Human Services (DHHS) cut rates for Medicaid providers, including many nonprofits. The cuts came after the NC Senate and NC House of Representatives were unable to agree on legislation to fully fund Medicaid for the current fiscal year. Specifically, DHHS:

A variety of nonprofits and individuals receiving Medicaid benefits met with legislators this week to share the impacts of the Medicaid cuts on the lives of North Carolinians. Both the NC Senate and NC House of Representatives have unanimously passed bills (three bills for the House) to fully fund Medicaid, but the chambers have been unable to agree on whether to include other provisions in the Medicaid funding legislation. It is unclear whether the House and Senate will be able to reach an agreement when they return to Raleigh on November 17.

Join peers from across the state at the 2025 Conference for NC’s Nonprofits, November 19-20 in RTP, to learn how nonprofit leaders are advocating for their communities, responding to policy changes, and protecting the heart of their missions and teams in the face of shifting policies and funding. The two-day event features a keynote on leading during uncertainty; deep dives on legal compliance, fundraising trends, and leadership pipelines; sessions on leadership, healthy workplaces, AI tools, funding strategies, and more; plus networking, an exhibit hall, and continuing education credits. Check out the full line up and register today.

Nonprofit Policy Update is the weekly newsletter on state and federal policy issues affecting 501(c)(3) nonprofits. Learn more about the Center's public policy agenda.
©2025 North Carolina Center for Nonprofits

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