Five years ago, as death, panic, and viruses were spreading across the globe, the Trump administration announced it was halting collections of college debt. At the time, almost everyone agreed this was a good idea. “It is going to make a lot of students happy,” President Donald Trump remarked. 

This week, an entire Biden administration later, Trump’s Department of Education began throwing the full force of the federal government against people who had defaulted on their student loans. Employers will be contacted, wages garnished, and debt collectors deployed. 

The move came a week after House Republicans released plans for a massive overhaul of student financial aid policy. Their bill would reduce the number of students eligible for need-based federal financial aid, make it harder for students to pay for tuition, books and living expenses, increase monthly loan payments for millions of borrowers, and make some people wait as much as 20 years longer to have their debts forgiven. Student happiness will no longer be a consideration.

Sometimes, members of Congress propose radical changes they know have little chance of becoming law. This isn’t one of those times. The Republican plan is part of the “big, beautiful” budget reconciliation bill, some version of which is likely to pass Congress before the year is out.

The much-debated dream of broad-scale debt relief and friendly student loans is fading. This is the beginning of a harsh new era for the roughly 43 million people who hold almost $1.7 trillion in federal student loans. For people who are struggling to make ends meet and are most vulnerable to Trump’s government service cuts and the economic devastation of his reckless trade policies, the timing couldn’t be worse.

The winding, lawsuit-filled history of student debt relief 

Trump’s initial move to suspend loan payments in 2020 was ratified by Congress a few weeks later in the CARES Act, which passed the House with a 419-6 vote. That was the last time Democrats and Republicans agreed on the issue.   

Loans were hotly debated during the Democratic primary that year. After Joe Biden’s November victory, influential party figures like Sen. Elizabeth Warren pressed him to unilaterally forgive some or all outstanding student debt. Biden was reticent — he preferred making a deal with Congress — but over time, progressive activists convinced him to launch an ambitious plan to wipe $10,000 off the balance of nearly every federal loan, and another $10,000 from debt held by low-income students. It was a historic opportunity, they argued, to help close the racial wealth gap and give relief to people who had been victimized by too-expensive colleges. 

Biden also untangled a knot of existing loan forgiveness programs designed to help people including public servants, students with disabilities, and people who were defrauded by their college. Those actions alone resulted in 5.3 million students having $188 billion in loans wiped away. 

A group of Republican attorneys general sued over the $10,000 plan, and the Supreme Court obliterated the program based on its newly fabricated “major questions doctrine.” Biden pressed forward with more loan forgiveness schemes. 

The most important was the SAVE plan, which was designed for (but not limited to) community college students. It lowered students’ monthly payments from 10 percent of their discretionary income to as little as 5 percent, and forgave any outstanding debts in as soon as 10 years for students with loans smaller than $12,000 (instead of 20 years). Almost 8 million people enrolled in SAVE.

As for student loan repayments, Biden extended the collections pause all the way until October 2023, when he was forced to restart the system by Republicans. After a one-year “on-ramp” to payment, the clock began ticking last October. 

The Department of Education has since told the servicing companies that manage the loans to start reporting non-paying borrowers to credit agencies. In just the last three months, millions of borrowers have suddenly seen their credit scores dip. This week marked the beginning of the federal government’s drive to start collecting on loans that were already in default before the pandemic. 

The plan that could devastate the financial aid landscape

College students and people with loans aren’t just facing harsh new debt collection tactics from the Trump administration. The president’s Republican allies in states and Congress are working to make college loan policy far less student-friendly in the future.

Another group of Republican attorneys general sued to stop SAVE, and the program is currently held up in federal court. (During this time, everyone in the program has had their loan put in suspended animation, meaning no interest has accrued and they didn’t owe payments.) The House Republican plan would reverse its efforts, eliminating a provision that set loan payments to $0 for low-income borrowers, and instead increasing payments to up to 15 percent of income for current borrowers and 10 percent for future borrowers. It would also deny forgiveness until 30 years of payments — that is, most of a borrower’s working life. 

Biden’s Department of Education wrote tough new rules designed to prevent students, particularly members of the military, from being defrauded in the first place. One rule cuts off federal financial aid to college programs that load up students with too much debt and don’t prepare them to get jobs that pay an adequate wage. The Republican plan would repeal virtually all of those regulations. It would also prevent future education secretaries from creating new loan forgiveness plans. 

This means that, for students entering college or graduate school for the first time, the financial aid landscape could be grim. The Republican plan puts new limits on how much students in high-cost areas or in high-cost programs can borrow for tuition, books, room and board, even as moderate-income students will no longer be eligible for federal grants. Borrowing for graduate and professional school could be capped in a way that would make it much more difficult for lower-income students to pursue careers in medicine and law. 

Those who do borrow will face repayment on much harsher terms. And with most of the guardrails protecting students from predatory for-profit colleges lifted, it’s more likely that they will be saddled with loans for degrees that have little or no value in the job market — if they manage to graduate at all. 

A sea change

For the last five years, many borrowers held out hope that they could move forward in their lives without the yoke of student debt. Debt forgiveness plans were announced and congratulatory letters mailed, only to have the courts and electoral politics pull those promises away. Now the Department of Education has declared, “There will not be any mass loan forgiveness.” As long as Trump is president, this is certainly true. 

Borrowers who took advantage of the five-year hiatus will need to get back in the habit of loan repayment. So will recent graduates who haven’t made payments before. For those in financial difficulty, even less-generous payments plans are almost certainly a better option than default. 

One student loan servicer reports that only 38 percent of borrowers are up-to-date and actively making payments on their loans as of February, down from 60 percent before the pandemic. This is partially a problem of Republicans’ own making — millions of borrowers have had their payments suspended while the SAVE lawsuit plays out in court. But there is no doubt that millions of people are at serious risk of defaulting on their student debt and suffering serious financial consequences. 

Restarting a collection system that was never designed to be turned off in the first place will be an enormous challenge for the Education Department and its contractors. Normally, the Federal Student Aid office (FSA) in the Education Department would have experts in place to help manage the vast, complex student loan system during a once-in-a-lifetime challenge. But Education Secretary Linda McMahon and Elon Musk’s Department of Government Efficiency minions gutted FSA during their recent purge of department employees. That means if the loan collection system cracks and falters under the strain, the government won’t have people with enough expertise to step in and fix it.

A wave of new student loan defaults later this year could dovetail in the worst possible way with a self-induced tariff recession, restricting access to credit at exactly the same time people are losing their jobs. College is supposed to be a path to economic mobility and security. The Trump administration and the Republican-controlled Congress seem determined to make that road as narrow, treacherous, and obstacle-strewn as it possibly can. 

When Chief Justice John Roberts vaporized Joe Biden’s half-trillion-dollar student loan forgiveness plan in June, he used some dramatically non-legal words to explain why. Writing for the Supreme Court’s six-member conservative majority in the case of Biden v. Nebraska, Roberts declared that the truly offensive and unacceptable thing about the Biden plan, which would have wiped out the loan balances of nearly 20 million people, was the sheer size of it. 

The economic and political significance of the scheme was “staggering by any measure,” wrote Roberts, and thus ran afoul of the Court’s radical new doctrine of limiting presidential power. 

Later that day, an angry Biden responded from the White House. His administration had been accused of being unprepared for other seismic court actions, like the Dobbs decision overturning Roe v. Wade. This time was different. The president announced that the Department of Education would immediately begin re-implementing the loan forgiveness plan using a different legal rationale. Progressive lawmakers and grassroots activists, who had been pressing the administration to continue the fight, cheered in response. 

But Biden’s so-called “Plan B” for mass loan cancellation comes at a perilous moment for student borrowers. For the last three and a half years, federal student loan payments and interest charges have been suspended because of the pandemic. Under the terms of the last-minute debt ceiling deal struck between the White House and congressional Republicans in June, the Department of Education is required to turn the loan repayment system back on in September. Monthly payments are due starting in October. 

Meanwhile, some of the same scholars who laid the legal groundwork for the original mass cancellation plan are saying that the Supreme Court will likely kill the new plan, too. 

The Biden administration is urging people to start paying their loans this fall. But it has also announced a year-long “on-ramp” to making payments that works much like the grace period borrowers face after leaving school, while simultaneously telling millions of borrowers their loans will be entirely forgiven by “Plan B.” 

The resulting confusion, stoked by student loan advocates who demand mass loan forgiveness with no compromises, could wreck the administration’s efforts to successfully restart the student loan collection system. By pushing a politically potent but legally dubious mass forgiveness strategy, President Biden may well be setting a debt trap for the same vulnerable borrowers he is trying to help. 

The new Biden student debt relief plan — and why it’s doomed to fail

While the White House has been short on details, all signs suggest that its next push for expansive forgiveness is essentially the same as the court-nullified Plan A, but based on statutory authority from a different law. The plan thrown out by the Supreme Court was based on the 2003 HEROES Act, which gives the Secretary of Education authority to waive or modify student loans during a national emergency, like a pandemic. The plan would have subtracted $10,000 from the balance of nearly every outstanding federal student loan. Women and people of color in particular would have benefited because they are more likely to borrow, and an additional $10,000 in relief would have gone to low-income students.

Plan B will be based on the Higher Education Act (HEA), which was first enacted in 1965 and is the main law governing federal college grants and loans. The HEA gives the Secretary of Education the authority to “compromise” or “modify, waive, or release” student debt obligations. These are collectively called “settlement authorities.” 

To block Plan B, Biden’s opponents will need legal standing to sue. Biden v. Nebraska began with the court deciding that the state of Missouri had that standing. Missouri’s argument was weak, but the Court accepted it anyway, as courts do when they like a plaintiff’s case. Which means the same plaintiffs would very likely have standing to oppose the new Biden plan. 

Biden’s lawyers will then have to grapple with the so-called “major questions doctrine,” a legal standard that has been brewing in conservative jurisprudence for several decades and was fully conjured into existence barely a year ago in the case of West Virginia v. EPA. The doctrine says it’s unconstitutional for federal agencies to do things of vast economic and political significance without clear congressional authorization — “vast” and “clear” meaning whatever the court wants them to mean. Critics have called this a “fake” doctrine with “no basis in any law or any provision of the Constitution,” and Justice Elena Kagan excoriated the majority’s reasoning in her dissent. But Roberts et al disagreed. That’s where the “staggering by any measure” part comes in. The Biden plan was too big to not fail. 

Which means the outcome of the next lawsuit will hinge less on the exact meaning of the Higher Education Act and more on whether the plan once again offends Justice Roberts’s sense of inappropriate vastness. And the White House has given every indication that vast is exactly what it has in mind. Perhaps anticipating Plan B, Roberts even made a point of declaring that the HEA only authorizes loan forgiveness in “certain limited circumstances,” which is pretty much the opposite of “subtract $10,000 from every loan.” 

Legal experts say the major questions doctrine is an enormous barrier for Biden to overcome. While studying for a PhD at Yale Law School, Luke Herrine wrote an influential 2020 law review article arguing that the Secretary of Education could use the settlement authority granted by the Higher Education Act for mass debt cancellation. Herrine also served as legal director of the Debt Collective, a student loan forgiveness advocacy group, before joining the law faculty at the University of Alabama. 

In the wake of Biden v. Nebraska, he now says, “The Supreme Court has given every indication that it’s not inclined to look favorably on novel uses of the HEA’s settlement authorities” to cancel student debt. 

In other words, Plan B will almost certainly meet the same fate as Plan A. 

The debt forgiveness trap

For student loan advocates, a loss in the Supreme Court is no reason to give up the fight. 

Mass student loan cancellation is a case study in how grassroots activism can move a social justice idea from the ideological fringe to the halls of power. With roots in the Occupy movement and a critical boost from Bernie Sanders’s insurgent 2016 presidential campaign, advocates used a combination of old-fashioned politicking and modern social media to shove debt cancellation into the center of the 2020 Democratic primary debate. 

Biden was reluctant. His official position as a candidate was that he’d support a plan to forgive the first $10,000 of people’s loans if it came in the form of a bill passed by Congress. But when Democratic control of the Senate was still in doubt in the months after the election, advocates immediately began pressing for unilateral executive action on loans, and they never let up. Indebted college-educated millennial voters had been a key to victory, they argued, and the White House risked alienating them without bold action on loans. When Biden announced his mass cancellation plan in August 2022 and the midterms went relatively well for Democrats shortly thereafter, the strategy seemed vindicated.

But the plan itself had been doomed since at least September 18, 2020, when Ruth Bader Ginsburg died in time for Donald Trump to seat a sixth conservative on the Supreme Court. The lawsuits from Biden opponents were inevitable, and all hopes that the same court that willfully discarded decades of precedent in recent decisions on abortion and affirmative action would approach the loan question with mercy and restraint came to naught. 

For student loan activists, the post-defeat course was clear: press onward with the same uncompromising tactics that had driven their success. Activists worked closely with the White House to push for the original mass forgiveness plan and to make sure that Plan B would be immediately launched in the wake of a Supreme Court defeat. The extent of their influence over Biden administration policy is well-represented in this recent Politico article, in which former Sanders campaign staffer and founder of the loan activist group We, the 45 Million Melissa Byrne says of former White House chief of staff Ron Klain, “We all loved Ron. He was personally invested.” 

Now Byrne is telling her followers, “No one needs to make a payment until October 2024 thanks to the on-ramp. Literally no one pay.” The Debt Collective says, “Student debt strike begins Oct 1.” It’s a strategy that Astra Taylor, a filmmaker and co-founder of the Debt Collective, has described as “economic disobedience.”

When asked for comment, Byrne invited this author to “Go shill for student loan companies elsewhere.” (Under reforms implemented during the Obama administration, companies haven’t made federal student loans since 2010.) 

The Biden administration is officially telling people to start making the payments that stopped in March 2020. But it is simultaneously telling those very same people that their loan payments are soon going to be reduced or, in the case of nearly 20 million people below the $10,000 and $20,000 thresholds, eliminated entirely. And thanks to the recently announced Department of Education “on-ramp” policy that Byrne cites, people who don’t make payments won’t be penalized or reported to credit agencies for at least another year. 

For borrowers, this is enormously confusing. Payments are due, but there is no penalty for not paying, and you might be paying down a loan balance that is going to be forgiven under a Plan B whose terms have yet to be announced and might not happen — or might, depending on who you believe.

For loan advocates, the critical thing is to continue the struggle. Mike Pierce, a lawyer and the executive director of the Student Borrower Protection Center, says no one can know for sure how the Supreme Court will treat Plan B and that the normal rules of crafting policies based on the likelihood of them being thrown out in court no longer apply. 

“We’re at an inflection point with this administration’s relationship to a corrupt and unethical right-wing court,” he says, arguing that obstructionist Supreme Courts in the past have eventually bent to public pressure. To Pierce, Biden backing away from mass debt cancellation would amount to “unilateral disarmament.” 

It’s time to get the loan system ready for repayment

The pandemic wasn’t the first time federal student loan payments have been paused. In 2017, payments were automatically suspended for borrowers living in areas affected by wildfires and hurricanes. When the pause ended the following year, federal officials who monitor the loan program began to notice a troubling pattern.

When people miss a student loan payment, they descend into a kind of limbo called “delinquency.” If they miss nine months’ worth of payments, they fall down another level into default, where their wages, tax refunds, and even Social Security checks can be garnished. When the disaster-area borrowers were required to start making payments again in 2018, the number of delinquencies began to rise. This continued for nine months and was immediately followed by an increase in the number of defaults. Some people may have fallen out of contact with the loan system and didn’t know they owed money again, or they couldn’t afford it or had lost the habit of making monthly payments.

The risk now is a similar default crisis on a massive scale. About two-thirds of undergraduates use debt to pay for their degrees. Over 5 million people have left college since 2020 who have never made a single payment on their loans. They may have changed addresses, switched phone numbers, or given loan servicers college email addresses that are now defunct. A recent study found that many borrowers used the payment pause to “increase borrowing on credit cards, mortgages, and auto loans.” If those debts are ongoing, borrowers may struggle to find room in their monthly budgets to make loan payments once again. 

For the Biden administration, Plan B creates a potent issue for the 2024 election. For advocates, it provides another year or two to be part of a righteous cause. But the price of all that will be paid by debtors in the form of ballooning balances, ruined credit, and more.  

Meanwhile, the agency within the Department of Education tasked with managing the federal government’s massive $1.6 trillion student loan portfolio has been rocked by an acute budget crisis. At odds over the Biden administration’s approach to loan forgiveness, Democrats and Republicans in Congress have been unable to agree on increasing the agency’s funding, hamstringing its ability to tackle the largest and most complex logistical challenge in the history of student loans. 

The Biden administration should be relentlessly focused on helping 40 million student borrowers successfully resume payments and avoid the delinquency trap that has befallen past borrowers. It has a powerful tool at its disposal: a new, very generous program for reducing monthly loan bills and accelerating loan forgiveness, called SAVE. This plan is — confusingly! — entirely separate from the plan the Supreme Court just jettisoned. It is also built on much firmer legal ground and has not been challenged in court.  

To ease the transition back to making loan payments, the Department of Education has announced an “on-ramp” policy, which functions much like the standard grace period that borrowers get after leaving college. For a year, starting in October, people can start making payments, but if they don’t, nonpayment won’t trigger reports to credit agencies or the ticking clock of delinquency and eventual default. 

The on-ramp makes a lot of sense — if it’s accompanied by an all-out effort to get student debtors back on track to repay their loans. Instead, the Department of Education has simultaneously kicked off a complex, multi-step regulatory process to implement Plan B,   requiring a morass of meetings, public notices, and comment periods. The inevitable lawsuit blocking the plan can’t be filed until after that process is complete.

That puts debt forgiveness opponents, including Biden’s rival in the presidential election, in the position of having to very publicly block tens of millions of people from getting their loans forgiven, again, just as the 2024 campaign reaches fever pitch. The inevitable defeat in court won’t come until 2025, after Biden has been reelected, or not. 

The political calculus is obvious. But there are 20 million people out there who were told they would never have to make another student loan payment. Now they’re being told they don’t really have to start paying their loans back for another year, after which the we-promise-it-will-work-this-time Plan B will take effect. If they take President Biden’s word at face value, why would they start making payments in October? 

Meanwhile, the same student loan advocates that the White House looks to for policy and political advice are actively discouraging their many followers from enrolling in repayment plans that reduce monthly payments and provide an accelerated, legally defensible path to loan forgiveness. The Debt Collective says, “Anyone who tries to sell you on IDR” (another acronym for the SAVE program) “is not your friend. The program does not work.”  

For anyone who takes this advice or is just confounded by the Biden administration’s confusing and contradictory student loan messaging, interest charges will pile up. To its credit, the Department of Education has largely ended “interest capitalization,” which means most borrowers won’t pay interest on their interest. But interest will still accumulate, and loan balances will grow. And every month without a payment delays when people can have their loans forgiven under SAVE, which the department has the legal authority to implement. 

Speaking on background, an education department spokesperson said, “The Department has already been directly in touch with borrowers and made clear that anyone who can make payments should do so when the payment pause ends later this year. The Department plans to do additional direct outreach with enhanced communications for borrowers who become delinquent after payments resume.”

The White House still has the option of not obstructing its own education department’s efforts to restart the student loan collection system. Legal expert Herrine believes a new forgiveness plan might survive Supreme Court scrutiny if it’s narrowly focused on certain distressed borrowers — “a more targeted form of cancellation might make it through,” he says.  

That could also clear space and focus political energy on other initiatives to prevent students from being saddled with unrepayable debt, like long-gestating rules for reining in abusive for-profit colleges. And it would make it easier to strike a congressional budget deal to properly fund the education department professionals charged with the gargantuan task of turning on a loan system that wasn’t designed to be turned off. 

Everyone could then turn to the challenge of redesigning the higher education financing system from the ground up so we don’t have so many loans that need forgiving. Debt scholars have proposed ideas like a new federal university system, affordable and open to all. 

For now, though, President Biden has the unenviable responsibility of telling 40 million people they have to write him a monthly check starting in October. But that’s his job, and doing it successfully will require copious amounts of coordination, discipline, and expertise. Instead, he’s sabotaging his own education department for political purposes — and sowing doubt and chaos along the way. 

Kevin Carey writes about education and other issues. He is a vice president at New America, a think tank in Washington, DC. 

President Joe Biden announced his administration’s long-awaited student loan forgiveness plan Wednesday, saying it will forgive $10,000 in student loans for borrowers who earned less than $125,000 during the pandemic. People who received Pell Grants, grants to low-income students, while they were enrolled in college will be eligible to have $20,000 in debt forgiven.  

The move will be enough to wipe out some student debt entirely: 15 million of the 43 million people with federal loans owe less than $10,000, and those borrowers are typically the most likely to fail to pay back their loans. In all, the plan will eliminate student debt for about 20 million people, according to an analysis provided by the Education Department, and decrease monthly payments by an average of $250 for borrowers with a remaining balance who are on standard 10-year payment plans.

The Committee for a Responsible Federal Budget, an anti-deficit group, came up with a price tag of $230 billion for a less generous version of the program that did not include the additional aid for Pell Grant recipients.

Biden’s announcement came after months of speculation and a pandemic pause on student loan payments that lasted more than two years. Ultimately, the plan showcases the attraction, and the limitation, of executive action. Biden had the opportunity to provide immediate financial relief to millions in need, and he took it. But the challenge of preventing people from falling into the student debt trap in the future remains.  

Here’s what we know about the policy and how it would work. 

I have student loans. What does the announcement mean for me?

If you have a federal “Direct Loan” — the most common type of student loan — issued before June 30, 2022, you will be able to apply to have your outstanding balance reduced. All direct loans are eligible, including loans to parents and graduate students. 

If you qualify and your balance is less than $10,000, the loan will be retired; if you received a Pell Grant while enrolled in college, the amount that can be forgiven goes up to $20,000.

Only people who earned less than $125,000 as an individual or $250,000 as part of a married couple in 2020 or 2021 will be eligible for forgiveness. 

The Education Department said in a press release Wednesday that 8 million borrowers may be able to qualify automatically because the Education Department already has information about their income. That still means the majority of people will have to apply. The application is not yet available, but the department said it will be made public before the end of the year.

If you aren’t eligible for forgiveness, or if it pays off only part of your loan balance, loan payments will resume in January 2023.  

About 10 million people, about a quarter of student loan borrowers, have federal student loans that are not “Direct Loans.” Most of these borrowers took out loans before 2010 through a now-defunct program in which private banks made student loans that were guaranteed and subsidized by the federal government. Others borrowed directly from their college through the federally financed, also-defunct Perkins Loan program. The Education Department says that non-Direct Loans and Perkins Loans currently held by the federal government will be eligible for forgiveness, while solutions are currently being explored for the minority of non-Direct Loans that are held by private entities.

If you took out a student loan from a private bank or lender and the federal government wasn’t involved, you still owe that money. 

That all sounds really complicated, with the $10,000 cap and the income limits and the application and so on. Why not just forgive all the loans?

The Biden administration chose this policy for a combination of political, policy, and legal reasons. 

Student loan forgiveness was a hot topic during the 2020 Democratic presidential primary. Elizabeth Warren promised to forgive the first $50,000 of student loans as soon as she took office. Bernie Sanders vowed to cancel all the debt. Joe Biden took what was, in the context of the debt forgiveness debate, a more moderate position, pledging to support congressional action to forgive $10,000 in debt. The voters chose Biden. 

The president, who attended the University of Delaware as an undergraduate, has said that he doesn’t want to subsidize well-off people who borrowed money for Ivy League degrees. The White House is likely wary of potential news stories about law firm partners getting what amounts to a five-figure check to write off their law school debt at the same time that less wealthy families are struggling to afford gasoline and food. 

The $10,000 limit also reflects a peculiarity in the relationship between the size of student loans and the likelihood of students paying them back. A study from the New York Fed found that students are most likely to default on the smallest loan balances and least likely to default on the largest. That’s because, if you’re a student, the only way to get a large student loan from the federal government is to go to graduate or professional school. 

While undergraduate loans are capped at $31,000 for most students, graduate loans have no hard cap and can range into the hundreds of thousands of dollars. People with graduate loans are, by definition, already college graduates, and thus on average will earn more money than people without degrees. Many graduate and professional degrees boost earnings even higher.  

Many people with small loan balances, by contrast, are college dropouts. They didn’t borrow much, but they have no credentials to help them earn better wages. Or they borrowed for a certificate that takes less than a year to earn and doesn’t have much value in the labor market. Many victims of exploitative for-profit colleges fall into this category. So do students who had few assets and little income before starting college. 

Of the 43 million people with federal loans, 15 million owe less than $10,000. Another 9 million owe between $10,000 and $20,000. By eliminating a minority of outstanding debt, Biden would forgive most or all balances for the majority of student debtors, disproportionately those who are at the highest risk of default.

Is this even legal? Is there anything Biden’s political opponents can do to stop him?

Maybe? And, maybe? The Higher Education Act is almost 60 years old, and no president has ever done anything like this before. The Trump administration’s 2020 decision to suspend all federal student loan payments, which Biden has extended multiple times, came from a separate law granting the president powers during a national emergency like a pandemic. Biden is citing that authority for the new loan forgiveness plan.    

There are a host of constitutional provisions, federal laws, and legal precedents that obligate federal agencies to collect on outstanding debts. Skeptics also point out that Congress has enacted a number of specific student loan forgiveness programs, including plans that eliminate remaining debt after 20 years of payments or 10 years of public service. The administration’s recent decision to wipe out debt for students who attended the notorious for-profit Corinthian Colleges was based on a discrete legal provision meant to protect students who were defrauded by their college.  

If Congress has specifically decided when loans can be forgiven, the thinking goes, it has also, by implication, decided that loans can’t be forgiven under other circumstances. Shortly before leaving office, Trump administration lawyers issued a memorandum asserting that the Department of Education does not have the authority to unilaterally forgive all the loans. But the Biden administration is not legally bound by that memo, and other legal scholars have argued that the department has the power to unilaterally forgive loans.  

Opponents of debt forgiveness will also have to get over a considerable legal hurdle called “standing,” which means that not just anyone can file a lawsuit claiming that an executive order is illegal. You have to demonstrate that you would be personally harmed by the action. Merely being a taxpayer who implicitly owes a percentage of the national debt doesn’t count. 

Because the benefits of debt forgiveness are specific and possible harms, such as the risk that loan forgiveness would worsen inflation, are generalized, few people or organizations can plausibly claim standing. Those that might include the organizations that the Education Department hires to service loans, since they get paid per borrower and forgiveness will reduce the number of borrowers to service. The “guarantee agencies” that hold many of the old non-Direct loans that would be refinanced are also candidates. 

That said, federal judges have been known to take an expansive view of standing if they really don’t like the action being challenged. In June, the Supreme Court’s West Virginia v. EPA decision placed new limits on the ability of federal agencies to expansively interpret their authority in matters of “vast economic and political significance.” The ultimate fate of executive loan forgiveness in the federal courts remains a big unknown. 

Let’s say the courts allow loan forgiveness to happen. Is it a good idea? 

Many Republicans have publicly opposed loan forgiveness, particularly in recent months, as the movement for executive action has gained steam. In May, Senate Minority Leader Mitch McConnell said, “Student loan socialism would be a giant slap in the face to every family who sacrificed to save for college, to every graduate who paid their debt, to every worker who made a different career choice so they could stay debt-free.”  

There are also arguments among the left about the progressiveness of debt forgiveness. Seventeen percent of Americans 18 and older have federal student loans. Most of them have college degrees. College graduates are, as a group, unambiguously better off than non-graduates. They earn more, own more, and are less likely to become unemployed. They live longer, healthier lives. 

The Committee for a Responsible Federal Budget estimated that an earlier version of the Biden plan, one that did not include the additional debt relief for Pell Grant recipients, would eliminate roughly $380 billion in student debt, with a net cost to the taxpayer of about $250 billion, given that some of the debt would have been wiped clean under existing forgiveness plans. There are ways to spend $250 billion that more directly benefit people who are most in need.

But the issue can look very different from the debtor’s point of view. The typical borrower is in their mid- to late 30s and still owes more than $20,000 in loans. A 36-year-old today who went straight to college from high school graduated right into the teeth of the Great Recession, when career-starting jobs were incredibly scarce. For many, graduate school felt like a safe harbor and good long-term investment — or so the college recruiters said. But that meant loans for living expenses along with pricey tuition, which can quickly inflate balances to $100,000 or more. 

Income-based loan plans were available to keep monthly bills manageable. Payments could also be pushed off or delayed. But that meant interest charges started to grow and capitalize on top of principal. Meanwhile, the hot real estate market put homeownership out of reach. Both the long-term financial payoff from a college diploma and unproven government promises to someday forgive loans can seem highly theoretical when your net worth is negative and moving in the wrong direction.  

The core argument for debt forgiveness is not that college graduates are more deserving than their degree-less peers. It’s that there are enough public resources to help both, and that graduates in the present are worse off than graduates in the past who benefited from more affordable public university tuition and weren’t thrown defenseless into an economic catastrophe. 

The typical college graduate, moreover, only provides so much analytic value for an incredibly diverse population of 43 million people with student debt. Black students, for example, are much more likely than others to take out student loans. They borrow larger amounts, are less likely to be able to pay down principal after leaving college, and are more likely to default — the legacy of centuries of state-sponsored racism that prevents Black households from building assets, and of predatory colleges that continue to target Black communities. The typical Black borrower would see their outstanding balance cut in half with $10,000 forgiven, according to an Education Department analysis.

Women take out the substantial majority of all graduate school loans because they live in a world with highly gendered labor markets that systematically require women to acquire, and pay for, more credentials than men — even though they often earn less. 

Assume the Biden plan is a good idea and that it holds up in court. Is it going to work?

 It depends on what you mean by “work.”

The decision to means-test the program and require many borrowers to apply for loan forgiveness is going to create a lot of problems. The political calculus is understandable, and not giving government benefits to rich people is generally progressive. But the vast majority of borrowers fall under the income caps — there just aren’t that many Ivy League lawyers with loans compared to the universe of people with any kind of student debt. The administration’s plan to automatically qualify some borrowers is a step in the right direction, but the application process could end up being anti-progressive in its results. 

People with bachelor’s degrees and full-time jobs who were steadily making loan payments before the pandemic could attach a copy of their recent tax returns to the application and quickly see their loan balances drop, or disappear. One of the main things traditional colleges teach, and select for, is being good at filling out paperwork on time. 

People who are, for myriad reasons, disconnected from or marginalized in the employment and tax systems will have a harder time. This includes millions of people who are in default on their loans because they aren’t working and therefore aren’t filing federal tax returns. It includes precisely the population of struggling small-balance borrowers the $10,000 benefit is designed to help.

The Biden plan also does nothing to address the underlying causes of the student debt crisis. The Department of Education makes about $90 billion in new student loans every year. Once the pandemic-era repayment pause is lifted, interest will continue to accrue. CRFB estimates that it will take only four years for aggregate federal loan debt to climb back up to the current level of $1.6 trillion. 

Most debt forgiveness advocates strongly support some flavor of the “free college” proposals that were first popularized by Sen. Bernie Sanders. President Biden included a nationwide free community college program in his 2021 Build Back Better agenda. But that program was jettisoned early in the negotiations and was not included in the final Inflation Reduction Act when it became law last week. 

Existing free college proposals from left-leaning lawmakers like Sanders would only eliminate undergraduate tuition at public colleges and universities. The majority of all loan dollars are borrowed for either private undergraduate colleges or graduate school. In other words, even the most expansive — and rapidly fading — progressive aspirations for higher education reform would leave the source of most student debt untouched. 

The debt crisis is often blamed on a broken higher education system. In truth, the problem is that we don’t have a national system at all. The Department of Education lends money to any student who enrolls in an accredited college — and colleges themselves decide who is accredited, with minimal federal oversight. There are no federal controls on what prices colleges can charge and few meaningful regulations on the quality of education they provide. States are free to pull money out of public universities, raise tuition, and let federal loans fill the gap. 

If the loan forgiveness program holds up in court, future presidents could declare more jubilees. But making students and parents borrow ever-larger sums for college and then sporadically forgiving loans based on political happenstance is no way to run a railroad. It would almost surely make all of the underlying forces driving up new loan balances even worse. 

If, on the other hand, the debt write-off never returns, a lot of people who take out student loans for the first time next year and in the years after that are going to raise their hands and ask why, exactly, they don’t deserve the same. 

Kevin Carey writes about education and other issues. He is a vice president at New America, a think tank in Washington, DC.