Gordon College Appeals Denial of PPP Loan Forgiveness, Judge Dismisses Most of its Claims 

Federal district judge determined PPP loan rules were neutral and not religiously discriminatory.

Like many colleges and organizations in 2020, Gordon College received COVID relief funds as part of the Paycheck Protection Program (PPP). But when the Massachusetts-based college applied for forgiveness, the Small Business Administration (SBA) denied its request on the $7 million loan.

An aerial view of Gordon College in Wenham, Massachusetts, in summer 2018. Photo by Mark Spooner/Gordon College

Gordon then sued the SBA for violating its free exercise of religion, equal protection, and due process rights, along with violations of the Administrative Procedure Act.

U.S. District Judge Beryl Howell in the District of Columbia dismissed most of the claims brought by Gordon College in a memorandum opinion issued in late July.

In her opinion, Howell said the SBA had sought follow-up documentation from Gordon College because the “employee count” was “indicative of concern.”

In April 2020, Gordon submitted its PPP application with 495.67 employees listed. It reached this number using the full-time equivalent method, which counts part-time employees as a fraction of an employee.

“Gordon College followed the procedures given at the time of the loan application and most importantly, used these funds completely in the manner in which they were presented by the SBA: to avoid layoffs of employees and continue to provide them with a paycheck even though the College was forced to shut down operations for months in 2020,” a spokesperson for the college said in response to a MinistryWatch inquiry.

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But the court recited that in later documents, the school “self-reported” 639 employees at the Massachusetts campus, which exceeded the maximum count of 500 employees allowed under the program.

Gordon College told MinistryWatch that when it applied for loan forgiveness in July 2021, the SBA had changed its language to “headcount” methodology rather than the full-time equivalent method. “This change by the SBA of the method of reporting employees is the basis for this dispute,” it said.

The college brought multiple claims, alleging the application of the 500-employee cap “substantially burden[ed] its religious exercise, in violation of the [Religious Freedom Restoration Act]; is non-neutral and non-generally applicable and thus is subject to, but fails to satisfy, strict scrutiny, in violation of the Free Exercise and Equal Protection Clauses; demonstrates a denominational preference, in violation of the Establishment Clause; and interferes with plaintiff’s religious autonomy, in violation of the First Amendment.”

The judge dismissed all of these claims against the SBA.

About the RFRA claim, the judge said Gordon College had failed to show any connection between its need to have more than 500 employees and its exercise of religion. “Indeed, plaintiff alleges no facts connecting its number of employees to any religious practice and has thus failed to establish that the PPP’s 500-employee cap burdens—much less substantially burdens—its exercise of religion.”

Howell pointed to similar reasons for dismissing the Free Exercise and Equal Protection claims because the application of the 500-employee cap was neutral and didn’t burden any particular religious belief held by Gordon College.

Gordon College argued that the SBA discriminated against it because of its “religiously and socially conservative views” in violation of the Establishment Clause. Gordon claimed that at least 25 other colleges that counted employees using the full-time equivalent method were forgiven loans of $5 to $10 million each, but it was being treated differently.

However, Howell sided with the SBA, saying Gordon failed to “allege that any of the ‘other, similarly situated religious colleges’ are of a different religious denomination to [Gordon], that [the SBA] exhibited a preference of one religion over another, or any other form of favoritism.”

Gordon College’s claims under the Administrative Procedure Act were not addressed in this court ruling.

“We respect that the recent federal court decision on this case rejected arguments around the question of discrimination based on religion but allowed other aspects of this dispute to move forward. We believe those do provide sufficient grounds for the Court to reverse the SBA’s denial of forgiveness and hope to see a favorable resolution of this issue in the future,” Gordon College said through its spokesperson.

Most of the COVID-era PPP loans were forgiven—an NPR analysis in 2023 found that 92% of the $800 billion in loans were granted forgiveness.

University of Texas professor Samuel Kruger estimates that of the $800 billion in loans, at least $64 billion showed signs of fraud. MinistryWatch has reported on many fraudulently-obtained PPP loans.

In the MinistryWatch database, Gordon College has a two-star financial efficiency rating, an A transparency grade, and a donor confidence score of 82.

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