President Trump generally does not support student loan forgiveness and would likely seek an end to some student loan forgiveness programs. But can the President claw back student loan forgiveness that has already been granted?

It's sparked a lot of concern in recent weeks, especially as President Biden continued to propose new student loan forgiveness plans and already has set a record during his presidency for the most student loans forgiven.

As of November 2024, President Biden has provided $175 billion in student loan forgiveness for 4.6 million borrowers, more than any previous president.

For borrowers that have already received forgiveness, the question looms:

Could Trump claw back student loan forgiveness that has already been granted? The answer is generally no.

Let's break it down and learn why past loan forgiveness is likely protected, but future loan forgiveness could be in jeopardy.

Related: Every Student Loan Forgiveness Program That Exists Today

President Trump's Position On Student Loan Forgiveness

During President Trump’s first term, his administration proposed eliminating the Public Service Loan Forgiveness (PSLF) program. This was reflected in the annual education appendices of the President’s budgets for fiscal years 2018, 2019, 2020 and 2021.

For example, the FY2021 budget sought to replace the existing Income-Driven Repayment (IDR) plans with a new Single IDR plan that would be ineligible for PSLF. The FY2021 budget described the proposed Single IDR plan as a streamlined repayment option intended to reduce complexity.

“The 2021 Budget would replace the five current Income Driven repayment (IDR) plans with one new Single IDR plan to make choosing a repayment plan less complex. The new IDR plan would become the only income-driven repayment plan for borrowers who originate their first loan on or after July 1, 2021, with an exception for students who borrowed their first loans prior to July 1, 2021 and who are borrowing to complete their current course of study  The Single IDR plan would: cap payments at 12.5 percent of discretionary monthly income while eliminating the standard repayment cap; limit loan payments to 15 years for borrowers with undergraduate debt only and 30 years for borrowers with any graduate debt—any remaining amounts owed after these repayment periods would be forgiven; calculate payments for married borrowers filing separately on the combined household Adjusted Gross Income; and eliminate Public Service Loan Forgiveness.”

Importantly, the budget proposal noted that existing borrowers would be grandfathered in, allowing those who borrowed prior to July 1, 2021, to continue accessing the original IDR plans and PSLF.  

“As with the Single IDR plan, these policies would apply to loans originated on or after July 1, 2021, with an exception for students continuing to borrow to complete their current course of study.”

The language in the previous budgets was substantially similar.

The repeated efforts to eliminate PSLF were unsuccessful, primarily because Congress created these programs through legislation, and only Congress has the authority to repeal them. This highlights the limits of executive power in altering statutory programs.

In addition to budget proposals, President Trump took executive action on student loans.  On August 21, 2019, he signed an executive memorandum that forgive the federal student loan debt of 25,000 disabled American veterans and established a data match between U.S. Department of Education and the Department of Veterans Affairs to streamline future student loan discharges for disabled veterans.  

Following the U.S. Supreme Court decision in Biden v. Nebraska (600 U.S. 477) on June 30, 2023, which blocked President Biden’s broad student loan forgiveness plan, the Trump campaign issued a press release on July 6, 2023 praising the ruling.

“The U.S. Supreme Court handed down massive wins for the American people — halting Joe Biden’s unconstitutional student loan gimmick, restoring fairness to the college admissions process, and applying the strongest safeguards to First Amendment rights in a generation,

One thing is clear: these wins were only made possible through President Trump’s strong nomination of three distinguished and courageous jurists to the Supreme Court.”

While there are no student loan proposals on the Trump campaign website, his remarks during the September 10, 2024 Presidential Debate criticized President Biden’s efforts, calling them “a total catastrophe.” He argued that Biden’s plan misled borrowers with false hopes of debt relief, leading to frustration and disappointment among students who expected their loans to be forgiven.

“When they said they're going to get student loans terminated and it ended up being a total catastrophe. The student loans -- and then her I think probably her boss, if you call him a boss, he spends all his time on the beach, but look, her boss went out and said we'll do it again, we'll do it a different way. He went out, got rejected again by the Supreme Court. So all these students got taunted with this whole thing about — this whole idea. And how unfair that would have been. Part of the reason they lost. To the millions and millions of people that had to pay off their student loans. They didn't get it for free.
…
They didn’t even come close to getting student loans. They taunted young people and a lot of other people that had loans. They can never get this approved.”

The Heritage Foundation’s Project 2025, although not formally endorsed by President Trump, contains policy recommendations that align with many of his administration’s priorities. Note that Lindsey M. Burke, author of the Department of Education chapter, has no known connection to the Trump administration. 

Here are a few key excerpts from the Department of Education chapter concerning student loan forgiveness:

“The new Administration must end abuses in the loan forgiveness programs. Borrowers should be expected to repay their loans.”

“Effective July 1, 2023, the department promulgated final regulations addressing loan forgiveness under the HEA’s provisions for borrower defense to repayment (“BDR”), closed school loan discharge (“CSLD”), and public service loan forgiveness (“PSLF”). … Acting outside of statutory authority, the current Administration has drastically expanded BDR, CSLD, and PSLF loan forgiveness without clear congressional authorization at a tremendous cost to the taxpayers, with estimates ranging from $85.1 to $120 billion. The new Administration must quickly commence negotiated rulemaking and propose that the department rescind these regulations.”

“While income-driven repayment (IDR) of student loans is a superior approach relative to fixed payment plans, the number of IDR plans has proliferated beyond reason. And recent IDR plans are so generous that they require no or only token repayment from many students. The Secretary should phase out all existing IDR plans by making new loans (including consolidation loans) ineligible and should implement a new IDR plan. The new plan should have an income exemption equal to the poverty line and require payments of 10 percent of income above the exemption. If new legislation is possible, there should be no loan forgiveness, but if not, existing law would require forgiving any remaining balance after 25 years.”

“The new Administration must end the prior Administration’s abuse of the agency’s payment pause and HEA loan forgiveness programs, including borrower defense to repayment, closed school discharge, and Public Service Loan Forgiveness.”

“Consolidate all federal loan programs into one new program that a) utilizes income-driven repayment, b) includes no interest rate subsidies or loan forgiveness, c) includes annual and aggregate limits on borrowing, and d) includes skin in the game to hold colleges accountable.”

“The Public Service Loan Forgiveness program, which prioritizes government and public sector work over private sector employment, should be terminated.”

“Further, the next Administration should propose that Congress amend the HEA to remove the department’s authority to forgive loans based on borrower defense to repayment; instead, the department should be authorized to discharge loans only in instances where clear and convincing evidence exists to demonstrate that an educational institution engaged in fraud toward a borrower in connection with his or her enrollment in the institution and the student’s educational program or activity at the institution.”

“End time-based and occupation-based student loan forgiveness. A low estimate suggests ending current student loan forgiveness schemes would save taxpayers $370 billion.”

Can The President Revoke Previous Loan Forgiveness?

Could a future President claw back forgiveness that has already been provided? 

No, the President cannot retroactively revoke student loan forgiveness once it has been finalized.

Once the federal government discharges a borrower’s debt and the borrower has received official notification, the forgiveness is considered permanent and final. Although the eligibility criteria for future borrowers can be changed, forgiveness that has already been provided is legally binding and typically irreversible.

Legal Precedents And Court Rulings

Historically, courts have treated student loan forgiveness as sacrosanct and protected from retroactive reversal.

For instance, in the June 24, 2024 ruling in Alaska v. U.S. (Case No. 24-1057-DDC-ADM) concerning the SAVE repayment plan, the U.S. District Court for the District of Kansas described student loan forgiveness as having an “irreversible impact.”

The court cited the Eighth Circuit’s decision in Nebraska v. Biden, noting that the HEROES Act forgiveness posed irreparable harm “considering the irreversible impact the Secretary’s debt forgiveness action would have.” (Nebraska v. Biden, 52 F.4th at 1045-47, rev’g 636 F. Supp. 3d 991 (E.D. Mo. 2022))

The court used this argument to justify an injunction, emphasizing that once forgiveness is granted, it cannot be undone. The court said that you “cannot unscramble this egg...” 

Similarly, in a ruling in Missouri v. Biden (Case No. 4:24-cv-00520-JAR), decided on the same day, the U.S. District Court for the Eastern District of Missouri refused to reverse any forgiveness already granted. Instead, the court limited its injunction to prevent further loan forgiveness under the disputed Final Rule’s SAVE repayment plan, reinforcing the notion that forgiveness, once provided, cannot be revoked retroactively.

Legislative And Contractual Protections

The federal government also generally does not attempt to claw back forgiveness once granted, and retroactively changing the terms of forgiveness would likely face significant legal challenges. If Congress were to pass a law repealing a forgiveness program like the Public Service Loan Forgiveness (PSLF), existing borrowers would typically be grandfathered in. Changes would apply only to “new borrowers” — defined as individuals who, on the specified date, have no outstanding federal student loan balance.

Two notable examples illustrate this approach:

• The Health Care and Education Reconciliation Act of 2010 (PL 111-152) modified the terms of the Income-Based Repayment (IBR) for new borrowers on and after July 1, 2024. It reduced the percentage of discretionary income from 15% to 10% and shortened the forgiveness term from 25 years to 20 years. [20 USC 1098e(e)]
  
• The Higher Education Amendments of 1998 (P.L. 105-244) restricted Teacher Loan Forgiveness to new borrowers as of October 1, 1998. [20 USC 1087j(b)]
  

These examples show that changes to forgiveness programs have historically been applied prospectively, not retroactively, to respect the contractual agreements already in place.

Due Process And Breach Of Contract

Retroactively removing loan forgiveness would likely violate due process and could be challenged in court under the principle of promissory estoppel, which prevents the government from revoking a promise that borrowers have relied upon. It would also likely be considered a breach of contract since all Federal loan borrowers sign a contract for the loan.

The Master Promissory Note (MPN), which borrowers sign when taking out federal student loans, outlines the specific terms and conditions under which loans may be forgiven or discharged. It explicitly references the Higher Education Act of 1965, providing a legal basis for forgiveness programs.

Key provisions in the MPN include:

• Under the REPAYE Plan, any remaining loan amount will be forgiven after you have made the equivalent of either 20 years of qualifying monthly payments over a period of at least 20 years (if all of the loans you are repaying under the plan were obtained for undergraduate study) or 25 years of qualifying payments over a period of at least 25 years (if any of the loans you are repaying under the plan were obtained for graduate or professional study).
• Under the PAYE Plan, if your loan is not repaid in full after you have made the equivalent of 20 years of qualifying monthly payments over a period of at least 20 years, any remaining loan amount will be forgiven.
  
• Under the IBR Plan, if your loan is not repaid in full after you have made the equivalent of 25 years of qualifying monthly payments over a period of at least 25 years, any remaining loan amount will be forgiven.
  
• Under the ICR Plan, if your loan is not repaid in full after you have made the equivalent of 25 years of qualifying monthly payments over a period of at least 25 years, any remaining loan amount will be forgiven.
  

The MPN also identifies conditions under which the loans may be discharged (forgiven), including the death discharge, total and permanent disability discharge, closed school discharge, false certification discharge, identity theft discharge, unpaid refund discharge, teacher loan forgiveness, public service loan forgiveness, and borrower defense to repayment.

Has Student Loan Forgiveness Ever Been Reversed?

In February 2024, a small number of borrowers experienced a reversal of loan forgiveness under the Public Service Loan Forgiveness (PSLF) program by MOHELA, a federal loan servicer. However, this was not a case of clawing back properly granted forgiveness; rather, the forgiveness had been granted in error due to incorrect information.

The reversal affected borrowers who had mistakenly been credited with qualifying payments they had not actually made. An audit by the U.S. Department of Education found discrepancies in the data, particularly involving incorrect dates on the borrowers’ PSLF employment certification forms. These errors resulted in borrowers receiving PSLF credit despite not meeting the eligibility requirements.

It is important to distinguish between correcting an error and a true clawback of forgiveness. In this instance, the forgiveness was reversed because it was mistakenly approved; the borrowers had not met the necessary requirements for PSLF at the time. In contrast, a clawback would involve revoking forgiveness that had been legitimately earned and granted under the applicable rules.

The federal government retains the authority to revoke loan discharges when a borrower is found to be ineligible based on the criteria in effect at the time of forgiveness. It could also revoke student loan forgiveness in cases of fraud.

This ensures that forgiveness programs are administered correctly and in accordance with the established guidelines, maintaining fairness for all borrowers who comply with the program’s requirements.

Student Loan Forgiveness Can Be Revoked For Future Borrowers

The federal government does have the authority to modify the requirements for student loan forgiveness and discharge, but these changes apply only to future borrowers. 

Once a loan has been forgiven under existing rules, it cannot be revoked retroactively.

However, eligibility criteria for new borrowers can be adjusted based on the method by which the forgiveness program was established.

Changes To Statutory Loan Forgiveness (Programs Passed by Congress)

If a loan forgiveness program was created through legislation, only Congress has the power to modify or revoke it. The President cannot unilaterally eliminate statutory forgiveness provisions via executive action. To modify these programs, Congress must pass a new law, requiring a majority vote in the U.S. House of Representatives and, typically, a super-majority vote (60 votes) in the U.S. Senate to overcome a filibuster.

There are exceptions, such as the use of a budget reconciliation bill, which can pass with a simple majority vote in the Senate. However, the Byrd Rule restricts the scope of such bills to provisions that have a direct impact on the federal budget, preventing non-budgetary policy changes. Additionally, changes to Senate procedures, such as eliminating the filibuster, could alter the legislative process.

Examples of statutory loan forgiveness programs include:

• Public Service Loan Forgiveness
• Teacher Loan Forgiveness
  
• Total and Permanent Disability Discharge
  
• Death Discharge
  
• Time-based forgiveness in Income-Contingent Repayment (ICR) and Income-Based Repayment (IBR)
  
• Borrower Defense to Repayment
  
• Closed School Discharge, Identity Theft Discharge, False Certification Discharge, and Unpaid Refund Discharge
  

Changes To Regulation-Based Loan Forgiveness (Programs Passed via Department of Education Processes)

When loan forgiveness programs are established through federal regulations, the U.S. Department of Education can amend or repeal these regulations. This process, however, can take up to a year due to the requirements of the rulemaking process. If new regulations are published in the Federal Register by November 1, they typically take effect on the following July 1. In some cases, the Secretary of Education may expedite implementation.

Congress also has the option to block existing regulations by passing a law, though this requires legislative action. (Congress can also block new regulations within 60 legislative days under the Congressional Review Act.)

Examples of regulation-based programs include:

• Pay-As-You-Earn Repayment (PAYE)
• Revised Pay-As-You-Earn Repayment (REPAYE)
  
• Saving on a Valuable Education (SAVE)
  

While Borrower Defense to Repayment was initially established by law, the specific rules and criteria have been shaped through regulations, making them subject to modification through the regulatory process.

Changes To Executive Order-Based Loan Forgiveness

If a forgiveness policy was created via an executive order, it can be modified or revoked by a subsequent executive order. However, executive orders cannot override loan forgiveness programs established by legislation or regulations.

An example of this is the bankruptcy discharge policy for student loans. Although the standard for undue hardship in the bankruptcy discharge of student loans is codified in the U.S. Bankruptcy Code (11 USC 523(a)(8)), additional criteria, such as the Brunner Test and the Totality of Circumstances Test, were developed by the courts. In 2023, the Biden administration implemented a policy to reduce the government’s opposition to bankruptcy discharge petitions in certain cases, such as when the cost of collection exceeds the expected recovery. 

This policy could be reversed by a future executive order, altering the government’s stance on bankruptcy discharges without changing the underlying law.

Related: Is Student Loan Forgiveness By Executive Order Legal?

Conclusion

In summary, once a borrower’s student loan has been discharged, the forgiveness is generally irrevocable.

Legal precedents, statutory frameworks, and contractual obligations outlined in the Master Promissory Note protect borrowers from retroactive changes.

While future legislation can modify forgiveness programs for new borrowers, existing recipients of forgiveness are typically shielded from any clawbacks or reversals.

Strategic default is the plan to intentionally avoid paying your student loans.

In 2011, some protestors encouraged borrowers to refuse to repay their student loans as part of Occupy Wall Street. They said that if enough borrowers joined this protest, the lenders would have no choice but to cancel the student loan debt.

Few people participated, and even those that did only lasted for a month or two. Nobody went into default as part of this protest.

More recently, after the U.S. Supreme Court blocked President Biden’s broad student loan forgiveness plan, some student loan protestors are once again urging their fellow borrowers to intentionally default on their federal student loans as a form of debt disobedience.

And now, with student loan payments resuming, more borrowers are thinking about intentionally not paying their debt.

This kind of strategic default on federal student loans was a dumb idea then and it is a dumb idea now.

When a borrower defaults on their federal student loans, the only one hurt is the borrower, not the federal government. Borrowers can’t force the federal government to forgive their student loans by refusing the repay them. Borrowers have no leverage, not even if they act together as a collective.

Even if the borrowers had some leverage, the U.S. Department of Education does not have the legal authority to forgive student loans, just as it doesn’t have the authority to incarcerate defaulted borrowers. Only Congress has the ability to pass laws to forgive student loan debt.

Why Strategic Default For Student Loans Is A Bad Idea

The federal government has very strong powers to collect defaulted federal student loans. They will get their money, one way or another, and the borrower will end up paying the penalty. Here are some of the tools the government has at its disposal. 

• The federal government can garnish up to 15% of a defaulted borrower’s wages administratively, without a court order. The wage garnishment exceeds the amount a borrower would have paid under an income-driven repayment plan. 
• The federal government can offset federal income tax refunds and up to 15% of Social Security disability and retirement benefits.
• Collection charges of up to 20% may be deducted from every payment, slowing the repayment trajectory.
• The federal government can prevent renewal of professional licenses (including driver's licenses in some states, not just the licenses of doctors, nurses, dentists, pharmacists, social workers, teachers, accountants and attorneys).
• The borrower will be ineligible for FHA and VA mortgages, can't enlist in the U.S. Armed Forces, and will lose eligibility for further federal student aid.
• The federal government (and private attorneys acting on behalf of the federal government) can sue defaulted borrowers to collect the debt. With a court judgment against the borrower, they can garnish a greater amount, place liens on the borrower’s property and get a levy to seize money from the borrower’s bank and brokerage accounts.
• The federal government can also seize the borrower’s lottery winnings.
• The federal government will report the delinquencies and defaults to credit bureaus, making it very difficult for the borrower to get any credit (or, in some cases, to rent an apartment or get a job).  
• Federal student loans are almost impossible to discharge in bankruptcy, so this debt will never go away.

Some people argue that the federal government benefits financially when a borrower defaults, especially if the borrower is capable of repaying the debt, since the collection charges increase the amount recovered. 

The federal government sometimes will settle defaulted federal student loans, but only when the loans have been in default for a long time. Such settlements are always greater than the loan balance when the loans went into default.

These settlements merely forgive part of the interest or collection charges that have accumulated since then. For example, a typical student loan settlement will forgive half of the interest that accumulated since the loans went into default.

The settlement must also exceed the amount the federal government expects to collect in the future. Borrowers can never get a discount on their current loan balance by intentionally defaulting on the loans.

A Better Way to Protest

Frustrated borrowers should write to their members of Congress. If enough borrowers complain, it does have an impact, as it makes the policymakers worry about getting re-elected.

Refusing to repay your student loans, on the other hand, does not have an impact, as politicians don’t listen to deadbeats. 

Borrowers can also protest by paying off their debt more quickly by making larger payments, if they are able. That costs the federal government more money, by reducing the total interest paid over the life of the loan.

It also hurts the loan servicers who are paid a monthly servicing fee only until the loan is paid off. The federal government and the loan servicers make more money when a loan is repaid over time. If you want to protest a loan, make the lender to lose money. 

Borrowers can also take advantage of existing options for student loan forgiveness and discharge, if eligible, to get rid of their debt.

These types of student loan cancellation, which were previously authorized by Congress, include the closed school discharge, total and permanent disability discharge, identity theft discharge, borrower defense to repayment discharge, loan forgiveness for employees of federal agencies, Segal AmeriCorps Education Awards, National Health Service Corps Loan Repayment Program, Teacher Loan Forgiveness and Public Service Loan Forgiveness. 

There’s also forgiveness after a borrower has made 20 or 25 years of payments in an income-driven repayment plan. A lender who has no loans makes no money.

Related: Does The Government Profit Off Student Loans?

Options for Borrowers Who Are Unable to Repay Their Student Loans

If a borrower is struggling financially, there are several ways to continue a personal pause, although interest may continue to accrue.

For borrowers who are experiencing a short-term financial challenge, such as unemployment or medical/maternity leave, options include the economic hardship deferment, unemployment deferment and general forbearances.

Each of these options suspends the repayment obligation for up to a maximum of three years, typically in one-year increments. But, interest may continue to accrue and may be added to the loan balance if unpaid.

For a more long-term financial difficulty, there are the income-driven repayment plans, where the monthly payment will be zero if the borrower's income is less than 150% of the poverty line. With the SAVE repayment plan, the threshold increases to 225% of the poverty line (assuming it survives the court cases).

The excess of accrued interest above the calculated payment will be forgiven if the borrower makes the required payment, including a zero payment.

More Stories:

The Biden administration published a new regulatory proposal for student loan forgiveness for borrowers who experience financial hardship on October 31, 2024. There is a 30-day public comment period which ends on December 2, 2024. The final rule probably won’t be published until early 2025.

This proposal is likely to be met with legal challenges based on the Administrative Procedures Act (APA) and the lack of specific operational criteria for forgiving loans.

Here's what to know about the a latest student loan forgiveness proposal for borrowers facing financial hardship.

Details: Financial Hardship Student Loan Forgiveness

This Notice of Proposed Rulemaking (NPRM) is the same as the proposal that came out of the negotiated rulemaking committee on February 22-23, 2024, since the committee reached consensus on the proposed language. 

The NPRM provides two pathways for financial relief, one automatic and one involving an application. The automatic method will provide one-time relief, while the application pathway provides ongoing relief.

Automated Pathway For Forgiveness

The automatic pathway would use a “predictive assessment” based on 17 factors to determine that a borrower’s loans “are at least 80 percent likely to be in default in the next two years after October 31, 2024.”

This may exclude borrowers who recently graduated from or dropped out of college, since it takes nearly a year of nonpayment after a 6-month grace period for a borrower to default on their student loans.

The 17 factors include:

• Household Income
  
• Assets
  
• Types Of Student Loans And Total Outstanding Loan Balance
  
• Ratio of Monthly Student Loan Payments To Household Income (Student Loan Debt-to-Income Ratio)
  
• Current Repayment Status and Other Repayment History Information
  
• Prior Receipt of a Federal Pell Grant and Other FAFSA Data
  
• Type and Level Of College Attended
  
• Typical Outcomes Associated With The Program Attended By The Student
  
• Whether The Student Completed The Program For Which The Federal Student Loan Was Borrowed
  
• Borrower's Age
  
• Borrower's Disability
  
• Number Of Years In Repayment
  
• Receipt Of Means-Tested Public Benefits
  
• High-Cost Burdens For Essential Expenses (Healthcare, Dependent Care, Housing)
  
• The Extent To Which Hardship Is Likely To Persist
  
• Any Other Indicators of Hardship Identified By the U.S. Department of Education
  

The proposed model also includes year of loan disbursement, interest rates, adjusted gross income (AGI) and EFC from the borrower’s first FAFSA, parent education level, and borrower dependency status, among other variables.  

The U.S. Department of Education has estimated that at least two-thirds of eligible borrowers are Pell Grant recipients.

Application Pathway

The application for forgiveness will involve a holistic assessment that the borrower has severe negative and persistent circumstances “such that the hardship is likely to impair the borrower's ability to fully repay the Federal government or the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt.”

If no other payment relief option exists sufficient to address the permanent hardship, the U.S. Department of Education will waive the loan.

The NPRM offers elderly borrowers who have been in repayment for decades as an example:

“Forty-one percent of non-Parent PLUS borrowers 62 years of age and older with an open loan have held their student loans for more than 20 years, and 30 percent of borrowers 62 years of age and older with an open loan have held their student loans for more than 25 years. Waiving such loans would not create significant costs for the Government in the form of transfers because the Department is unlikely to receive significant additional payments from a retired borrower.”

The draft regulations also propose to provide full or partial forgiveness when the "borrower experiences an unanticipated expense — such as medical bills, high childcare costs, caring for loved ones with chronic illnesses, or natural disaster — that could impair their ability to fully repay the loan." It gives as an example a chronic health condition for a dependent that costs more than 7.5% of adjusted gross income (AGI).

But, the draft regulations do not identify specific circumstances that warrant relief, instead leaving it to the U.S. Department of Education’s discretion after a holistic review of the borrower’s circumstances.

Potential Impact

According to the U.S. Department of Education, the proposal will provide financial relief to nearly 8 million borrowers, or about a fifth of the total number of borrowers with outstanding student loan debt.

The U.S. Department of Education has estimated the forgiveness as costing $112 billion over 10 years. The Committee for Responsible Federal Budget has published a higher estimate as high as $600 billion.

There may be some partially offsetting savings from no longer attempting to collect uncollectable loans, but there will also be a cost associated with reviewing applications for forgiveness.

The U.S. Department of Education has stated a goal of reducing the 1 million new defaults each year. But, eliminating the loans doesn’t address the underlying problem.

Likely Legal Challenges To The Plan

There will likely be legal challenges against the proposed regulations when the final rule is published in the Federal Register. The basis for the legal challenges will likely include the Administrative Procedures Act (APA). The APA bans regulations that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” [5 USC 706(2)(A)] or which are “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” [5 USC 706(2)(C)]

In the aftermath of the U.S. Supreme Court’s invalidating the Chevron test in Loper Bright Enterprises v. Secretary of Commerce, the courts no longer grant deference to federal agencies in interpreting the law.

A key problem with the NPRM is that it is vague and potentially in conflict with other statutory requirements.

The draft regulation does not provide any specific details concerning how the U.S. Department of Education will determine that a borrower “is experiencing or has experienced hardship related to the loan” other than through a set of 17 broad factors that could encompass all borrowers. 

The draft regulations refer to a predictive model, but do not specify the details of this model, nor any other specific objective criteria. For example, while it refers to a debt-to-income ratio, it does not establish the specific debt-to-income threshold that will qualify for forgiveness. 

Similarly, while it refers to persistent hardship, it does not define what qualifies as persistent. Is it two years? Five years? Seven years? Ten years? Indefinite?

The 80% likelihood is a rather weak probability threshold. It is similar to the probability that a coin toss will yield heads twice in a row.

The draft regulations may also conflict with statutory provisions concerning default aversion and enforced collection of defaulted federal student loans. After all, if the regulations will forgive the student loan debt of borrowers who are highly likely to be in default, it will likely include all borrowers who are already in default and render moot existing statutory requirements concerning default aversion and default collection. 

The U.S. Department of Education claims that the statutory waiver authority in Part B of the Higher Education Act of 1965 [20 USC 1082(a)] provides it with the authority to implement these regulations. That is the same authority claimed as the basis for a previous NPRM published on April 17, 2024 that would establish a broad set of targeted relief measures.

The legal challenges against that NPRM likely will also apply to the new NPRM. 

Possible Fixes To Prevent Legal Challenges

Forgiveness for persistent economic hardship could be reasonable in several circumstances. However, the vagueness of the current language poses a problem.

Specific guidelines could be created to define financial hardship that could qualify for loan forgiveness, such as:

• When the cost of collecting the debt exceeds or will exceed the amount to be collected.
  
• When the borrower’s age, disability and health will prevent the borrower from repaying the debt. When a borrower reaches normal retirement age, their income decreases significantly. The offset of up to 15% of Social Security retirement and disability benefit payments is a morally bankrupt policy.
  
• When a borrower has been in default for a very long time, with no progress towards paying off the debt, the potential recoveries do not justify the cost of attempting to collect the debt.
  
• When calculating a borrower’s ability to pay, income should be reduced by the amount of high ongoing medical and disability-related expenses of the borrower and the borrower’s dependents.
  
• A five-year definition for persistent hardship would be consistent with the requirements for a Total and Permanent Disability (TPD) discharge.
  
• Debt-to-income ratios that are similar to the thresholds used in Income-Based Repayment (IBR). If a borrower’s circumstances are so severe that they are likely to persist in IBR with a zero or very low payment for most of the repayment term, why not forgive the debt? This would include borrowers with income that is below a specific multiple of the poverty line, such as 150% or 225% of the poverty line, and will likely persist at that level for a long period of time.
  

Other Options For Relief If Facing Financial Hardship

There are several existing options for financial relief that borrowers might consider.

If a borrower is experiencing short-term financial difficulty, deferments and forbearance temporarily suspend the repayment obligation. These include the economic hardship deferment, unemployment deferment, and general forbearance, each of which has a three-year limit. Interest may continue to accrue during a deferment or forbearance.

If a borrower is experiencing long-term financial difficulty, alternate repayment plans, such as extended repayment and income-driven repayment, may reduce the monthly payment to a more affordable level. The main drawback is the borrower will remain in debt for two decades or longer.

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With the Saving on a Valuable Education (SAVE) Plan paused due to the ongoing litigation, many borrowers are wondering: should I exit the SAVE plan and start making student loan payments under another repayment plan?

For most borrowers, the answer is no. Borrowers on the SAVE plan should likely just enjoy their administrative forbearance, save their estimated monthly payment in a high yield savings account, and then resume making payments once the dust settles.

However, there are three circumstances where borrowers may benefit from changing out of the SAVE plan and into another repayment plan.

1. You're Close To Receiving Public Service Loan Forgiveness

If you’re nearing the completion of the 120 qualifying payments required for Public Service Loan Forgiveness (PSLF), switching from the SAVE plan to another income-driven repayment (IDR) plan could expedite your path to forgiveness.

What is close? 1-2 payments away to be safe, but maybe up to 6 payments if you want to deal with the risk.

Why one or two payments? Even in a worst case scenario of your lender failing to process your repayment plan request timely, the processing forbearance of 60 days should cover your two months (processing forbearance DOES count for PSLF).

However, switching to a non-blocked plan like the Standard 10-Year plan could also be beneficial, just remember that you will likely have significantly higher payments. We don't recommend this, but we also know there are some people that are willing to do anything to get across the 120 payment finish line.

2. You're Eligible For Another Repayment Plan

Right now, borrowers can only enroll in the Standard plans or the IBR plan (and SAVE, but you're here reading this because you're in SAVE). However, the Department of Education said it does plan to re-activate the PAYE and ICR plans for new enrollment as well, in the coming weeks.

For borrowers who have met the criteria for forgiveness under a different IDR plan, transitioning away from SAVE might allow you to have your remaining balance forgiven sooner. Typically, IDR plans require 20 to 25 years of consistent, on-time payments to qualify for debt cancellation.

It’s important to confirm that you meet all necessary requirements before making the switch. The nuances of each IDR plan can significantly impact your eligibility and the timeline for forgiveness. 

Here's a handy guide from the Department of Education on what's available right now:

3. You're Concerned About PSLF Buy-Back

The PSLF Buy-Back program allows borrowers to receive credit for past periods of repayment that might not have initially qualified toward the 120-payment requirement. However, relying on this program could introduce delays.

For those early in their PSLF journey, opting for a different qualifying repayment plan may provide a more straightforward path without the potential complications associated with the Buy-Back program.

Final Thoughts

Of course, you can always change repayment plans to one of the open plans if you want to pay off your student loans faster - but for over 50% of borrowers, that doesn't make sense. Most borrowers in the SAVE plan should simply stay put during the administrative forbearance, and then take action once the court cases are resolved and more clarity is available.

Taking action right now is risky, so borrowers should simply save and prepare.

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Almost 50% of students borrow student loans for community college.

It's no secret that the cost of going to college and debt from student loans have significantly increased over the past several decades. Although wages have also gone up, the cost of higher education has increased more than inflation. The average cost of tuition for a four-year private college is $43,775 and $28,238 for public. And what's even scarier is that the most expensive colleges cost over $60,000 per year!

Many potential college students explore community college because it offers cheaper tuition than traditional four-year colleges. In 2024, the average tuition for public community colleges is approximately $5,184 per year for in-state students and $8,806 for out-of-state students. 

So while going to a community college is more affordable than other forms of higher education, you still may need to explore student loans for community college to cover the cost.

Can You Go To Community College For Free?

Before considering taking out any student loans for community college, you should check to see if you can go to community college for free. Many states and local jurisdictions have programs that offer free tuition for community colleges and some other education institutions. For example, the California College Promise Grant offers free community college to eligible California residents.

It's important to realize that getting free community college tuition from one of these programs doesn’t mean that you won’t have any expenses. There will be costs for books, fees, and housing expenses if you aren't living at home. 

Still, before you look at student loans for community college, you may want to explore any options you have for free community college tuition. That way, you'll have a better idea of how much you'll need to take out in community college student loans.

Related: Tuition-Free College - What You Should Know

Fill Out The FAFSA

In order to get student loans for community college, you'll follow the same process as getting loans for any other institution of higher learning. Also, the FAFSA is the key to unlocking Pell Grants, state-based grants, and other financial aid.

The first step towards community college student loans is filling out the FAFSA. The FAFSA or Free Application for Federal Student Aid will have you give information about your income and, if applicable, your parents' incomes.

If you don't fill out the FAFSA, you will not be eligible for any federal student loans. It's also important to understand that you need to fill out the FAFSA each and every year. This is because your income and financial situation changes every year, which can affect how the amount of federal loans you might be eligible for.

While most community colleges do accept federal student loans as payment, some do not. If you're not sure, you can see if your college is listed in the Federal School Code Search site.

Federal Student Loans For Community College

If you're eligible for them and your community college accepts them, you'll want to first consider federal student loans. There are three types of federal student loans for community college students that you'll want to consider:

Federal student loan limits for community college students are the same as loan limits for students at any other college. However, given the lower cost of community college, hopefully you can stay within the limits.

Private Student Loans for Community College

If federal student loans aren't sufficient for your particular situation, you may want to consider private student loans for community college students. Private student loans are awarded based on the borrower's financial situation and credit history. So if you are a young student, you may not qualify for private student loans unless you have a solid employment and credit history, or you get a cosigner.

And if you do qualify as the student, the interest rates and terms on your private student loan may not be very attractive unless your credit score is good or excellent. That may mean that you'll need to get someone like a parent to apply or cosign for your private student loan.

The good news is that if you or your cosigner have excellent credit, the rates on private student loans can be even lower than those on federal student loans. One downside of private student loans however is that they won't qualify for federal programs like potential student loan forgiveness.

Note: While private student loans are an option, they should be the very last resort. And there are almost no scenarios where you should use private loans for community college. The Federal loan limits should cover your needs, and Federal loans are always better than private loans.

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The Bottom Line

Community college can be a viable alternative for many people than a traditional four-year school. This is especially true if you're in a situation where you're not sure about what to major in or what you want to be when you grow up. Attending a community college can help you explore different subjects while keeping costs down.

While expenses at a community college are typically lower than those at four-year schools, you may still want to get student loans for community college. The first step is to fill out the Free Application for Federal Student Aid (FAFSA), and then you can choose between federal student loans for community college and private student loans for community college.