Trump team eyes quick rollback of Biden student debt relief

By Michael Stratford

President-elect Donald Trump is poised to pull the plug on President Joe Biden’s yearslong push to cancel student debt for tens of millions of people as Republicans sweep into power in the coming months.

Trump transition advisers and outside allies have been discussing ways to quickly unwind the various Biden-era initiatives that offered new or easier paths to loan forgiveness for borrowers, according to two people familiar with the discussions.

The move would be the culmination of nearly four years of attacks by GOP lawmakers and attorneys general on Biden’s student debt relief policies. On the campaign trail, Trump slammed the loan forgiveness efforts — which total hundreds of billions of dollars — as “vile” and illegal. Yet his team faces a daunting challenge: A series of recent court decisions has left the federal government’s $1.6 trillion student loan portfolio in disarray, with millions of borrowers stuck in limbo.

Addressing Biden’s signature student loan repayment program, known as the SAVE plan, will likely be more difficult.

The plan, which the president finalized last year, caps monthly payments at 5 percent of income for undergraduate borrowers, offers more generous interest subsidies and allows loan forgiveness in as few as 10 years of repayment for some borrowers. Republicans have criticized it as an overly expensive program that operates essentially as a back-door route to mass loan forgiveness.

Roughly 8 million borrowers were enrolled when judges froze the plan earlier this fall. As a result of the court orders, the Education Department has suspended monthly payments for those taking advantage of the program. But reverting those borrowers back to earlier, less generous repayment plans presents both legal and operational hurdles.

Trump transition advisers have been looking at ways to rescind the SAVE plan while also figuring out how to replace it with other repayment options for borrowers, according to the same people familiar with the discussions.

“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail,” Karoline Leavitt, a Trump-Vance transition spokesperson, said in a statement. “He will deliver.”

The loan-servicing companies that manage federal student loans say they’re bracing for changes under the new administration. But they caution that any major overhaul of the federal student loan system will take time to implement.

Scott Buchanan, who heads the Student Loan Servicing Alliance, a trade group for loan servicers, said the coding and technical work to unwind the Biden-era SAVE program and recalculate millions of borrower payments under a new system could take months.

“It certainly wouldn’t be an overnight sort of reversal,” Buchanan said. “It’s not a simple fix if that’s where the next administration goes.”

The Trump team also faces a decision on when to resume the Education Department’s collection of defaulted federal student debt, which has been paused since the beginning of the pandemic.

Trump has nominated Linda McMahon, the former head of the Small Business Administration, to be Education secretary. McMahon has been co-leading the presidential transition and chairs the America First Policy Institute, an outside group that’s been preparing for a second term. The group has blasted Biden’s loan policies as “unlawful, counterproductive, and deeply unfair.”

Jonathan Pidluzny, who directs higher education issues at AFPI, is also working on student loan and education issues for the transition, according to people familiar with the discussions.

“It’s going to be insanely complicated,” said Michael Brickman, who was a senior Education Department official during the first Trump administration. “You really can’t overstate the mess that this new administration is inheriting.”

A federal judge has blocked Biden’s second attempt at mass debt cancellation after the Supreme Court rejected his first plan last year. Federal appeals courts have frozen Biden’s loan-repayment program that offered lower monthly payments, setting off confusion over the amount that millions of borrowers must pay. And the Trump administration will have to decide how to resume the collection of defaulted student debt that’s been suspended since the beginning of the pandemic.

In the run-up to the election, the Biden administration said it would delay garnishing the wages, tax refunds and Social Security benefits of nearly 6 million defaulted borrowers until 2025. But the Education Department hasn’t provided details on how that would work.

Despite legal setbacks, the Biden administration has granted forgiveness to nearly 5 million borrowers, totaling more than $175 billion, more than any other administration. The bulk of that loan forgiveness was the result of the Education Department expanding the rules of existing relief programs aimed at helping specific groups of borrowers, such as public service workers and those who were cheated by their schools.

“President Biden has worked to fix the student loan system, make college more affordable, and give Americans a bit more breathing room since he came into office,” White House spokesperson Angelo Fernández Hernández said in a statement. “Republican elected officials have repeatedly attempted to block their own constituents from getting lower payments and receiving the relief they are eligible for.”

Trump frequently denounced Biden and Vice President Kamala Harris on the campaign trail for failing to deliver on their broad student debt relief promises. “It ended up being a total catastrophe,” he said at the September presidential debate, criticizing Harris for being all “talk” when it came to student debt. “All these students got taunted,” he said.

Beyond reversing Biden’s student loan policies, Trump’s second-term student loan agenda is less clear.

During his first term, he proposed an income-driven repayment program for borrowers that would cap payments at 12.5 percent of income and discharge remaining balances after 15 years of repayments. He also signed an executive order forgiving the student debt owed by severely disabled veterans.

And when he couldn’t persuade Congress in August 2020 to extend the pandemic pause on student loan payments, Trump invoked executive action to extend the moratorium, setting the stage for the Biden administration to repeatedly extend the policy for another 2½ years.

Any major overhaul to federal student loans is likely to come from Congress.

Republicans on Capitol Hill have for years weighed bills to streamline and scale back some of the benefits of the federal student loan program and allow private lenders to better compete with federal loans.

They’ve also proposed capping federal student loans for graduate school — among the fastest-growing class of borrowers — and ways to stick colleges and universities with the cost of federal student loans taken out by their former students that end up defaulting.

A. Wayne Johnson, who was the federal student loan chief during the first Trump administration, has embraced some student debt relief for borrowers who engage in national service. But he took issue with what he called the “weaponization” of student loan policy under the Biden administration, which he said canceled student loans based on “invented reasoning.”

“The Trump administration understands the difficulty with which students and families are having to deal with this incredible amount of debt that’s been placed on their backs,” said Johnson, who most recently was a Republican congressional candidate in Georgia. ”The question is: What is the appropriate policy? It’s not all about debt cancellation.”