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The Biden administration has struggled with student debt problems. In March 2021, shortly after Biden took office, incoming officials discovered that while about two million people were eligible for their debt to be canceled under the Department of Education’s income-driven repayment (IDR) program, only 32 people had actually seen it happen. An NPR report in April 2022 detailed major problems in the program, mainly constant paperwork errors on the part of the servicers contracted to handle the payments. And then, of course, the Supreme Court struck down Biden’s debt forgiveness plan.
But progress is still being made. On Friday, the administration announced that it had ironed out some kinks in the IDR program, and as a result, 804,000 borrowers will have their loans canceled, erasing a total of $39 billion in debt. That comes on top of previous cancellations that had provided $66 billion in relief to 2.2 million borrowers—already more than any previous president—as of July 1, under IDR and other programs.
That reflects the fact that at this point, the IDR tool is probably the best tool Biden possesses to provide student debt relief. It will be an annoying headache for the administration to set up, but its powers are basically limitless, and arguably established on a firmer legal footing than any other option.
As Matt Bruenig explains at People’s Policy Project, the Higher Education Act requires the Department of Education to create an IDR program in which “students must pay (1) a certain percent of their income (2) beyond a certain percent of the poverty line (3) for a certain number of years in order to receive debt forgiveness.” The specific parameters here are set almost entirely at the discretion of the secretary of education, and have been changed many times over the years.
Indeed, the Biden administration started the rulemaking process on a revised IDR program back in January that would provide forgiveness to borrowers who paid 5 percent of any income above 225 percent of the poverty line (meaning if you make less than that, you pay nothing) for ten years on loans originally totaling under $12,000, or 20 years on ones larger than that. This is much more generous than the current IDR program under which the current round of forgiveness is happening.
The only problem is implementation. So far, the administration appears to be on the right track. The key thing is cutting down on paperwork, so providing forgiveness automatically to eligible borrowers, as they’ve done with the current round of forgiveness, rather than requiring them to fill out a bunch of forms first is smart. Smarter still would be to enroll people in IDR by default, as my colleague David Dayen argues. If people don’t have to do anything to get into the program, and don’t have to do anything to get their debt written off, then we’ll really be cooking with induction.
That won’t be easy. There are about 43 million people with student loans, and only about nine million are currently enrolled in IDR. Getting those remaining 34 million people enrolled into anything is going to be a tough task. And as Dayen also argues, the restarting of student loan payments at the end of August is likely to be a Kafkaesque nightmare, once again because of incompetent servicers.
All this is not to say that Biden shouldn’t also pursue his other plan, announced just hours after the Supreme Court struck down his cancellation program under the HEROES Act, to do a similar cancellation under the Higher Education Act’s “compromise and settlement” authority (as the Prospect advocated back in 2019). But the right-wing Supreme Court majority might be more likely to strike such a move down under its preposterous “major questions doctrine,” which is nothing but a cockamamie excuse for getting rid of things it doesn’t like.
IDR, by contrast, not only is on a firm legal foundation, but also has existed for decades, and is currently delivering debt forgiveness by the billions. Obviously, if the Supreme Court is hell-bent on inflicting pain on student borrowers, then nothing will stop them (aside from packing the Court or just ignoring it) from striking this down as well. But politically, they might be more hesitant to strike down a program with such a long precedent, particularly when it would involve re-imposing debt on people who have already gotten it wiped away.
In any case, best to try to keep this Court on the back foot by trying to achieve one’s objectives through as many legal means as possible.
Should the program stand, we can see the sketch of a system of higher-education finance that makes a lot more sense than the current one. As Laura Beamer and Marshall Steinbaum argue at The New York Times, the plain fact is that most student debt is not ever going to be paid back, because a large and increasing share of borrowers are not making any progress on their loans. Ironically, the repayment pause implemented during the pandemic actually improved student loan repayment on net, because it stopped unpaid interest from piling up.
With IDR, higher education would instead be financed with an ersatz, semi-progressive payroll tax on graduates. It’s not how I would do it, but it would make a lot more sense than the status quo. The last step would be to impose strict price controls on colleges and universities, so they don’t take advantage of future loan forgiveness to shoot their prices even further to the moon.
At any rate, I’ll admit that I never thought Biden would actually go through with his campaign promises to student borrowers. But all evidence suggests he is determined to do just that.
