The Biden Administration Has Cancelled $48 Billion in Student Loan Debt Since the Supreme Court Struck Down Forgiveness Program
In late June, the Supreme Court struck down President Joe Biden’s signature student loan forgiveness program. However, since then, the administration has successfully found ways to cancel over $48 billion in student loan debt. These cancellations have been made through existing federal student loan forgiveness programs, which are limited to specific categories of borrowers. These categories include public-sector workers, individuals who were defrauded by for-profit colleges, and borrowers who have been making payments for at least 20 years.
It is important to note that these programs are separate from the rejected forgiveness plan, which would have eliminated approximately $430 billion of the $1.6 trillion of outstanding federal student loan debt all at once. The Biden administration has been providing student loan forgiveness through these existing programs on an ongoing basis since taking office, and to date, they have discharged a total of $127 billion for nearly 3.6 million people. This is more student loan forgiveness than any other administration has granted, partly due to the Biden administration’s efforts to temporarily expand certain debt relief programs and correct past administrative errors made to borrowers’ accounts.
This stands in stark contrast to the actions of the Trump administration, which attempted to limit some of these forgiveness programs and slowed down the processing of applications. However, critics from the Republican party argue that some of Biden’s debt relief actions are illegal and an attempt to circumvent the Supreme Court’s ruling.
Recounting Past Payments and Fixing Errors
Of the $48 billion in federal student loan debt that has been cancelled, nearly $42 billion has been cancelled for almost 855,000 borrowers enrolled in income-driven repayment plans. This cancellation is largely due to the Biden administration’s effort to recount borrowers’ past payments and correct what officials have referred to as “past administrative failures.”
Borrowers enrolled in income-driven repayment plans, available since 1993, are generally eligible for debt discharges after making qualifying payments for a minimum of 20 years. These plans lower monthly payments by linking them to a borrower’s income and family size. However, the Department of Education has historically faced challenges in accurately tracking borrowers’ payments.
Last year, the US Government Accountability Office called on the department to take more steps to ensure that borrowers receive the forgiveness they are entitled to. The agency discovered that there were thousands of loans still in repayment that were already eligible for forgiveness. In response to this, the Department of Education has implemented a one-time recount effort to give borrowers credit towards forgiveness for any months in which they made payments, regardless of the repayment plan they were enrolled in at the time. This is especially beneficial for borrowers who were incorrectly placed in long-term forbearance periods where they stopped making payments.
A Legal Challenge Looms
The one-time account adjustment effort was announced by the Biden administration in April 2022 but did not begin until this year. Just two weeks after the Supreme Court struck down Biden’s loan forgiveness program, the administration announced the cancellation of $39 billion in student loan debt due to these changes. This raised skepticism about the legality of the move.
Republican Representative Virginia Foxx, chair of the House Committee on Education and the Workforce, criticized the administration, stating, “The Biden administration is trampling the rule of law, hurting borrowers, and abusing taxpayers to chase headlines.” She added, “Today’s celebration of counting no payments as payments is just the latest example of the ongoing delusion at the White House.”
The Biden administration is currently facing a lawsuit filed by the New Civil Liberties Alliance on behalf of conservative groups, the Cato Institute and the Mackinac Center for Public Policy, challenging the account adjustments. The plaintiffs recently appealed the dismissal of the lawsuit by a federal judge in Michigan, who ruled that they did not have standing to bring the complaint.
The Biden administration’s lawyers have not yet responded to the complaint or specified the legal authority behind the cancellation of billions of dollars of student loan debt through adjusting past payments. Abby Shafroth, co-director of advocacy at the National Consumer Law Center, believes that even if the lawsuit succeeds, it is unlikely to reverse the debt relief that has already occurred.
Expanding Debt Relief Program for Public-Sector Workers
Through the Public Service Loan Forgiveness (PSLF) program, the Biden administration has cancelled $51 billion of student loan debt for 715,000 borrowers since taking office. The PSLF program erases outstanding federal student loan debt for public-sector workers who have made 120 qualifying monthly student loan payments, equivalent to approximately 10 years of payments. Various government and nonprofit workers, including teachers, social workers, nurses, doctors, and government lawyers, can qualify for the program.
The PSLF program was established by Congress in 2007 but faced administrative issues before Biden’s presidency. In 2021, Biden implemented a temporary waiver to expand eligibility so that some borrowers could retroactively receive credit for past payments that did not initially qualify for PSLF. Over 95% of borrowers who received debt relief through the PSLF program did so due to Biden’s temporary waiver. Although the temporary benefits expired in October 2022, the Department of Education has permanently modified some of the qualifying restrictions of the PSLF program through an executive rulemaking process. These changes allow borrowers to receive credit towards PSLF for late, installment-based, or lump sum payments. The changes went into effect in July.
Processing Claims from the Trump Administration
Through the borrower defense to repayment program, the Biden administration has cancelled $22.5 billion of student loan debt for over 1.3 million borrowers. This program provides student debt relief to individuals who were defrauded by their colleges. Most recently, $37 million was cancelled for more than 1,200 borrowers who attended the University of Phoenix because the government determined that the for-profit school misled students about job prospects.
The borrower defense program was created by Congress decades ago but was rarely utilized until the collapse of Corinthian Colleges, a for-profit school network, in 2015. Under Biden’s leadership, the Department of Education has made significant progress in addressing a backlog of borrower defense claims that accumulated during the Trump administration. At one point, over 200,000 borrower defense claims were pending as former Education Secretary Betsy DeVos attempted to limit the program. However, her efforts were ultimately unsuccessful.
Cutting Red Tape for Disabled Borrowers
The Biden administration has also simplified the process for disabled borrowers to receive the debt relief they are entitled to. Since 2021, nearly 513,000 borrowers with total and permanent disabilities have received $11.7 billion in student loan forgiveness. Previously, borrowers had to provide documentation from a physician, the Social Security Administration, or the Department of Veterans Affairs to prove their eligibility for debt relief. However, the Biden administration changed the rule so that the Department of Education can automatically discharge disabled borrowers without requiring additional paperwork. The department identifies eligible borrowers through administrative data matching with the Social Security Administration.
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