After President Biden Cancels Student Debt

Meeting the urgency of the college affordability and student debt crisis will require bold action to restore the promise of opportunity for all Americans.

In this article
Three borrowers holding signs that say Cancel Student Debt
Student loan borrowers gather near The White House to tell President Joe Biden to cancel student debt, May 12, 2020, in Washington. (Getty/Paul Morigi/We, The 45 Million)

At its best, the American higher education system is an unparalleled force offering people from all walks of life the opportunity to thrive and contribute to a better and more prosperous nation. The public both expects and deserves a system in which all colleges and programs offer a path to economic security while making sure that students reach the finish line. Yet while millions have pursued these higher education paths to better themselves and their communities, systemic failures—including runaway college costs, state disinvestment in higher education, and insufficient federal support for students—have created an affordability crisis that is hollowing the system out from the inside.

This crisis has real consequences. In a moment when the national economy needs more credentialed workers, a recent Public Agenda/USA Today survey found that only 49 percent of Americans currently think the gains realized from a college education are worth the costs, and 72 percent think the economy is rigged to advantage the powerful and the wealthy.1 Young Americans in particular hold these concerns, and they are right to do so. Consider this: In the 1970s, the Pell Grant program—the United States’ most fundamental federal student assistance program—covered about 80 percent of the costs of attending a four-year public institution. Now, it only covers around 30 percent of those costs. Today’s students can plainly see that a promise made to the previous generation is not being made in turn to them.

The cost of inaction here is high. Research from Opportunity Insights shows declining rates of low-income student enrollment at the colleges with the best track records of delivering intergenerational economic mobility.2 More recently, a report from the National Student Clearinghouse Research Center revealed a year-over-year decline in college enrollment of 685,000 students, a 4.1 percent drop.3 While the reasons for this decline are complex and vary by institutional sector, we can be certain that soaring college costs and the perception of less return on the investment in a credential are crucial parts of the story everyday Americans are hearing.

Student debt is clearly another important part of that story. The end effect of the college affordability crisis has been to leave far too many Americans saddled with excessive student loan debt.

The Biden administration has already taken important steps to make the current system work as promised and deliver relief, resulting in more than $25 billion in debt discharged for millions of borrowers so far.4 And the administration has committed to carrying out student debt cancellation for a broader population of borrowers—recognizing that there is still more it must do to help borrowers get out from under the weight of debts that too often interfere with buying a home, building a family, and pursuing career aspirations.

In response to these concerns—and to meet the urgency of the moment—this administration should follow through on its reported consideration of student debt cancellation by canceling at least $10,000 for student loan borrowers.

This would ensure that of the one-third of all Americans with student loan debt, many would see their balances reduced to zero, while others could see their balances drastically reduced.5

And while this action would certainly ease financial strain for millions of borrowers, it would also help restore trust in the institutions of government and their ability to deliver on implicit commitments. Government can and must serve as a force for good in the lives of every individual in the United States, and that means that students who relied on federal loans—and the promise of affordable opportunity—should never have been left worse off than if they had not gone to college in the first place. Government can, and should, fix that.

As the administration pursues this bold and necessary action on student debt cancellation, it should keep the following key things in mind:

  • Student debt cancellation should be designed with ease of implementation in mind. In keeping with the principle of restoring social trust, it is necessary to consider the ease of implementing any debt cancellation proposal; the system should work for students and borrowers, not against them. Recent research from the Center for American Progress shows how means testing and other government program requirements for social safety programs can serve as a barrier for intended beneficiaries.6 Keeping this in mind, the U.S. Department of Education should use all available data and resources across the federal government to make debt cancellation as automatic as possible and develop an outreach plan so that all borrowers are aware of their eligibility.
  • Student debt cancellation should advance racial equity and justice. Action to cancel student debt should strive to address the weight borne by borrowers from underrepresented groups and help close the racial wealth gap. The risks associated with default disproportionately affect Black or African American and Hispanic or Latino borrowers, and Black Americans hold a disproportionate amount of student loan debt.7 As the Congressional Black Caucus previously stated, “Canceling student loan debt is one of the most impactful ways to address ongoing economic and racial inequities plaguing our nation.”8
  • Student debt cancellation must be part of a comprehensive approach to addressing college affordability. In tackling the issue of student debt, government must look at both root causes and effects. The current student debt crisis is the result of a combination of factors: state disinvestment in higher education, increases in tuition that have outpaced inflation over time, predatory institutional practices, insufficient accountability within the higher education system, and the declining purchasing power of the Pell Grant and other forms of federal assistance. While cancellation will help alleviate some of the burdens associated with carrying student debt, concerted action must be taken to ensure that current students and future generations do not encounter this same situation years from now.

The task ahead is the restoration of higher education as a foundational engine of opportunity in this country. Government must redress the ills in this system that have too often harmed those most in need of its benefits, but it cannot stop there. It must go on to hold education providers, accreditors, loan servicers, and other actors accountable for their service to students and borrowers, as it affirmatively redesigns the higher education system to restore that early promise to serve individuals, restore social trust, and ultimately build a stronger nation.

Jesse O’Connell, senior vice president for Education, Center for American Progress

Introduction and summary

With more than 43 million borrowers owing more than $1.6 trillion in outstanding federal student loans,9 the nation is at a critical juncture on the shared problems of college cost and student loan debt. For years, rising costs, state disinvestment in higher education, and insufficient federal support for students and borrowers have all contributed to what is commonly known as a “student debt crisis.” In response, many have called on President Joe Biden to cancel some or all student debt—a decision the president could make at any moment.

But after President Biden cancels student loan debt, two crucial questions will remain: How do we prevent this situation from happening in the future? And what do we do about any student loan debt that may remain?

In exploring these questions, this report outlines a series of issues and recommendations for Congress and the administration to consider, ranging from expanding grant and work-study aid and implementing stronger institutional accountability measures to reforming the student loan system. These recommendations are intended to address the long-term and short-term needs of borrowers and students after an amount of student loan debt is canceled.

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Preventing this situation in the future

Without further intervention, after President Biden cancels some amount of student loan debt, students will continue to take out loans and, once again, accumulate debt. Colleges and universities will continue to take in billions of taxpayer dollars without sufficient justification for the prices they charge or for increases in tuition year after year. And many institutions will confer low-quality degrees that leave their holders with little economic opportunity.

In order to prevent a situation where another round of broad-based debt cancellation is needed in the future, Congress must address the root causes of student loan debt by increasing grant aid, controlling the actual cost of higher education, and implementing stronger institutional accountability measures.

First, aid: Expanding the availability of financial aid programs

As the purchasing power of the Pell Grant and other financial aid programs has declined relative to the cost of college over the years, more students have relied on federal student loans to cover outstanding costs. While states and institutions have important roles to play in expanding need-based grants, federal financial aid programs are the cornerstone of college affordability. If Congress wants to prevent another student debt crisis from emerging in the future, it must ensure that funding for grants and work-study outweighs the funding provided for new loan volume.

According to the Department of Education:

In fiscal year 2023, new Direct Loan volume alone will account for about 67 percent of all new postsecondary student aid (including loans, grants, and work-study) available from the Department.10

That means that a majority of the aid that the federal government provides to students comes in the form of loans. For FY 2022, the Department of Education estimates that the federal government made $85 billion available in the form of non-consolidation loans.11 That’s more than all funding for Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), and Federal Work-Study (FWS) in that fiscal year combined. While new loan volume does not represent the actual cost of the loan program for the federal government, it does mean that the largest source of federal financial aid for students comes in the form of loans.

As a result, many advocates have called for doubling the Pell Grant,12 which the president’s FY 2023 budget proposes to accomplish by 202913 through increases in discretionary and mandatory funding, as the Pell Grant is funded through multiple streams. On the discretionary side, both the House and the Senate Appropriations Committees recently proposed a $500 increase to the Pell Grant maximum award for the 2023–2024 award year. When combined with the increase from the last fiscal year, the Pell Grant maximum award will have increased by $900 in discretionary funding over two fiscal years. However, this is only one part of the equation to double Pell, and Congress should increase the mandatory streams of funding for the Pell Grant program as well.

In doubling the Pell Grant by 2029, the FY 2023 budget proposes an increase of approximately $12 billion in mandatory budget authority for the Pell Grant program.14 Congress should meet this request. The FY 2023 budget also assumes approximately $1 billion in mandatory funding for the Pell Grant program through the mandatory for discretionary stream. This amount is set in statute and is useful in freeing up resources for increases on the discretionary side. While some funding was added to this line item through the FUTURE Act,15 Congress should increase funding here too. In FY 2020, $1.5 billion was available for this funding stream; for FY 2023 and each succeeding fiscal year, $1.2 billion is available.16

In addition to the Pell Grant program, Congress should increase funding for FWS and FSEOG. These programs also provide crucial aid to students with financial need. For FY 2022, these programs received $1.21 billion and $895 million in funding, respectively.17 The House Appropriations Committee recently proposed $1.24 billion for FWS and $920 million for FSEOG,18 and the Senate Appropriations Committee recently proposed $1.24 billion for FWS and $915 million for FSEOG.19 Congress should make these investments, but it will be important to provide increases to these programs in the future, so that more students in need can benefit.

Taken together, further investments in Pell, FSEOG, and FWS will help more students finance their education and cover their living expenses without having to take out loans. This will mean less debt for current and future students and make good on higher education’s promise of economic opportunity and mobility.

At what cost?: The need to control rising college costs

While Congress must increase grant aid and work-study opportunities, it must also control college costs. In the debate over broad-based debt cancellation, both sides of the aisle have alluded to skyrocketing college costs. Yet colleges and universities are conspicuously absent in the conversation around addressing the country’s student debt crisis.

Prior to current economic concerns, increases in tuition outpaced inflation. According to the Bureau of Labor Statistics, college costs increased 63 percent from 2006 to 2016.20 After President Biden cancels some amount of student loan debt, Congress and other stakeholders, such as state and local governments and institutions of higher education, must look to control costs while also increasing aid. However, the two must go together.

Last year, the Biden administration put forward a proposal to make two years of college universal or free for eligible students attending community colleges and historically Black colleges and universities, tribal colleges and universities, and other minority-serving institutions.21 Through a federal-state partnership, that proposal would have controlled college costs by reducing tuition expenses to $0 for eligible families. Beyond the president’s free community college proposal, there are other free college proposals that would control the costs of higher education by eliminating tuition for most families.

Another approach for controlling cost would be to require institutions to have “skin in the game.” Essentially, this concept requires institutions of higher education to share in the risks of higher education as well as the rewards—to take responsibility for poor outcomes as well as any funding received from increases in federal financial aid.22 This was a popular concept with the former chairman of the Senate Committee on Health, Education, Labor and Pensions, Sen. Lamar Alexander (R-TN).23

While there are many proposals to consider related to this concept, Congress could look to the campus-based aid programs as one possible model. To acquire access to federal funding from these programs, institutions must contribute a portion of the aid. Applying this approach to federal student loans, Congress could require institutions to cover at least one-third of the cost of originating principal. For example, if an institution wants to make $100 million in loans available to students, the federal government would cover $66 million and the institution would be required to contribute the rest. That would help limit tuition increases, as institutions know that the higher their prices, the more they have to contribute. There are other “skin-in-the-game” proposals that could also limit and reduce costs, such as charging institutions a fee for defaults or having institutions cover only a portion of a student’s unpaid debt, and those too should be explored.24

Lastly, in addressing the costs of higher education, the administration could make use of the new authority it has to regulate the cost of attendance. For the first time, the secretary of education can actually help define the cost of attendance under Section 472 of the Higher Education Act.25 This has the potential to standardize certain costs at institutions across the country.

Quality control: The need to hold colleges accountable for poor outcomes

At the federal level, most colleges are not held accountable for noncompliance or poor outcomes. This reinforces the cycle of students enrolling in low-quality programs that do not help them realize the economic opportunity a higher education is supposed to afford. Even when certain penalties are scheduled to occur, such penalties may not be implemented for political reasons. For example, Congress has provided waivers for institutions through appropriations bills, sparing institutions from facing the consequences of having high cohort default rates (CDR). While the Department of Education has many tools at its disposal to hold institutions accountable, such as letters of credit and heightened cash monitoring, other tools may still be needed.

For example, as a result of the payment pause on student loans during the COVID-19 pandemic, students have not had to make payments on their loans, effectively eliminating the risk of default. While this is certainly a good thing for students and borrowers, as the Center for American Progress has previously noted, it will have an impact on CDR calculations going forward.26 This means that for some time, CDR will not be a useful measure for holding institutions accountable for poor outcomes. In keeping with prior CAP recommendations, Congress should implement repayment rates in addition to default rates as an accountability mechanism.27

In addition to fixing CDR, Congress should consider creating a system of escalating consequences. For example, every institution could start off with 100 percent of Title IV aid and see a 5 percent or 10 percent reduction in aid for each month, semester, or award year in which it falls short of some regulatory or statutory provision. If a college were to fail to improve, it would ultimately be cut off completely from federal financial aid. While this could be considered a form of risk-sharing, such a system may also be useful in curbing bad behavior and noncompliance.

The federal government could also consider revising the tax treatment of institutions of higher education when they fail to comply with federal accountability measures. This could include failure to comply with rules and regulations from the Department of Education, as well as Department of Defense, Department of Veterans Affairs, and other agency rules and regulations. State and local governments also have a role to play here in evaluating what tax breaks or benefits institutions of higher education receive based on their compliance with state and local requirements.

The Biden administration has been working to restore protections such as the borrower defense rule.28 And with the administration’s gainful employment rule29 and some other regulatory measures delayed,30 Congress can support the administration’s efforts by codifying and expanding aspects of these rules. But not all consumer protection measures need to be punitive. For example, while codifying aspects of the gainful employment rule, Congress could expand the rule to provide incentives for covered institutions to stand up registered apprenticeship programs for their students instead of requiring them to take out loans. For example, the Century Foundation notes that Workforce Innovation and Opportunity Act (WIOA)-funded programs, including apprenticeships, may be a more appropriate means through which to train cosmetologists than higher education’s debt-financed system.31 But other programs for barbers and massage therapists may also benefit from using a registered apprenticeship model—and some of these professions already have apprenticeship programs in place.32 In addition to increasing funding for registered apprenticeships and other WIOA programs, Congress should better support career-oriented programs and workforce needs through alignment between the higher education and workforce development systems. This could happen through efforts to reauthorize the WIOA and the Higher Education Act. The administration could also conduct outreach to programs covered by its upcoming gainful employment rule, letting them know of registered apprenticeship opportunities and WIOA-funded programs.

Congress can also strengthen accountability in higher education by dedicating funding specifically for that purpose at the Department of Education. Recently, the department reinstated the Office of Enforcement within the office of Federal Student Aid. While this office will certainly improve the quality of the higher education system, funds for the office appear to be coming from the Student Aid Administration account—the same account that must be used for a whole host of pressing issues, including servicing reforms; implementation of the FAFSA Simplification Act, which includes reforms to how aid is calculated for students, among other things; and implementation of the FUTURE Act, which includes new data-sharing opportunities, among other things. Congress should dedicate funding specifically for program integrity at the Department of Education. This funding could be used not only to support the Office of Enforcement but also for investigations, audits, and efforts to address fraud and misrepresentation across the educational system. However, such funding should be closely monitored by Congress and the public to ensure that it is only used to weed out bad actors and improve the overall quality and performance of the higher education system, not for political purposes.

Overall, more work is needed to explore the future of accountability for the higher education system—and CAP will continue this work through future publications.

Also read

Handling students’ remaining loan debt

After President Biden takes action to cancel student debt, some level of debt will remain for most borrowers, and many of them may still struggle to repay their loans. In short, although broad-based debt cancellation may ease the burden felt by borrowers, it may not erase that burden completely. Until the federal government can achieve the structural and systematic reforms presented above, Congress will need to pursue policy changes that help borrowers manage the debt that remains in the aftermath of broad-based debt cancellation.

Therefore, policymakers must tackle student loan interest rates, eliminate the punitive impacts of default, and improve the dysfunctional programs that are intended to help borrowers pay back their loans. While there is much the administration can do and is doing in this space, in order to make deep and long-lasting reforms, Congress must also take action to provide student loan debt relief more broadly, as many of these items will require statutory changes.

Of interest: Reforming student loan interest rates

In response to the economic upheaval caused by the COVID-19 pandemic, student loan payments have been paused since early 2020—thanks to bipartisan action by Congress, the Trump administration, and, later, the Biden administration. During this time, interest has not accrued on existing federal student loans, saving borrowers nearly $5 billion each month.33 But once repayment resumes, interest will present a challenge for many returning borrowers, including those still affected by ongoing economic turmoil caused by the pandemic. But other than the tax deduction on student loan interest—which only helps those borrowers who have federal income tax liability and provides a very modest benefit for those in lower tax brackets—and a 0.25 percent reduction in interest if a borrower signs up for auto-debit, there is not much in the way of targeted federal relief for student loan interest.34 But if the country wants to provide lasting economic relief for borrowers, there should be.

There are many options to consider in reforming student loan interest rates. For example, Congress could consider eliminating interest altogether for all loans or at least some of them (such as subsidized loans).35 However, that would likely carry a hefty price tag due to budgeting rules, which would see a reduction in interest as a loss in revenue for the federal government. Cost, however, does not have to be a barrier to reform, but it may limit the number or size of the reforms Congress is able or willing to pursue at any given time.

Another economic relief option would be to lower the cap, or maximum, on interest rates, currently set at 8.25 percent for undergraduate subsidized and unsubsidized loans, or simply allow borrowers to borrow at the same rate as the 10-year Treasury note.36 Currently, interest rates are established using a statutory formula, which adds additional points to the 10-year Treasury note based on enrollment status. (The fewest points are added for undergraduate loans; more points are added for parents and graduate students.)37 This means that, through statute, federal student loan borrowers have a higher interest rate than the rate at which the federal government borrows money through the 10-year Treasury note. Allowing borrowers to borrow at the same rate as the federal government and lowering the interest rate cap would have the economic effect of lessening the amount that borrowers would have to pay back on their student loans, saving money for borrowers to put toward food, housing, child care, or starting a business. Other organizations, including the National Association of Student Financial Aid Administrators, have made similar recommendations, and Congress should take action to provide this relief.38

Congress could also consider using an income-based interest model to tackle the issue of student loan debt. For most commercial loans, a borrower’s interest rate is based on their credit score or their financial ability to pay back a loan. The greater the financial stability, the lower the interest rate. However, under an income-based interest approach, interest on student loans would not begin to accrue until a borrower could afford to pay that interest—for example, when they reach a set income threshold such as $100,000 or more. This may not be a huge leap for the student loan system, as the federal government already pays the interest on subsidized loans while a borrower is in school, during grace periods, and during deferments. This means that borrowers exhibiting financial need are not required to pay interest on their loans until after they leave school or are in active repayment. An income-based interest model would just extend the period in which a borrower with financial need would not be required to pay interest on their loans. This policy is in keeping with the intent of the federal financial aid programs, which provide aid to students based on need.

In addition to these options, the federal government can eliminate interest capitalization—a practice through which any unpaid interest gets added to the principal balance at certain events (such as deferments and forbearance)—as well as negative amortization, an effect where a borrower’s monthly payment is not enough to cover both interest and principal.39 While the administration has already taken important steps through a regulatory proposal to eliminate most interest-capitalizing events, some of these events are statutory and can only be eliminated by Congress (such as exiting deferment and leaving income-based repayment). Therefore, Congress must eliminate the remaining statutory interest-capitalization events. In addition to eliminating interest capitalization, the federal government should eliminate negative amortization, so that any unpaid interest is not added to the principal balance of a loan, regardless of the plan used and in order to ensure that borrowers will not see ballooning balances over time. Organizations such as New America have also suggested this, and Congress should consider these proposals when reforming the student loan program.40 However, this too would likely carry a significant cost.

In thinking about lasting economic relief for current and future borrowers, Congress should reform the student loan system by creating a revolving fund. Right now, all payments that borrowers make on both interest and principal go into the General Fund.41 This is the same all-purpose fund that the federal government uses to pay for a vast array of government programs. Congress could instead create a revolving fund or a special fund where student loan payments could be used to fund specific higher education programs, such as Pell Grants or other student debt relief options.42 However, Congress may still need to supplement this fund from time to time if it is used for debt relief. 

Forgive us our debts: Improving Public Service Loan Forgiveness and income-driven repayment

The federal student loan system offers important safeguards, such as income-driven repayment (IDR), to ensure that borrowers are able to afford their monthly payments and have their debt forgiven after a period of time. The IDR plan with the longest path to cancellation offers forgiveness after 25 years of payments. Another program, called Public Service Loan Forgiveness (PSLF), is designed to make public sector work affordable to those with student loan debt, offering forgiveness after 10 years.

But due to administrative failures, very few borrowers have realized the benefits of debt forgiveness under these programs.43 Although Congress attempted to fix the PSLF program by creating the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program, this fix was itself riddled with problems, including a confusing application process.44 In response to these administrative failures, the Biden administration has taken important steps through waivers that temporarily ease certain eligibility rules to compensate for flaws in the programs and errors made by loan servicers and prior administrations. However, these waivers are temporary in nature, and they will likely expire near the end of the national emergency declared in response to the pandemic. The Department of Education recently proposed new regulatory changes to PSLF that would make it easier for borrowers to have their payments count toward forgiveness. The changes would also make improvements to the application process; clarify definitions; and allow certain periods of forbearance, deferment, and payments made prior to participation in a PSLF-covered plan to count toward forgiveness.45 These regulations will have a tremendous impact on borrowers. However, as noted in the explanatory sections of the proposed rule, there is still more to do that cannot be accomplished through regulations alone.

Given the long-standing problems with IDR and PSLF,46 the administration should extend the PSLF waiver beyond its current expiration of October 31, 2022, and Congress should codify elements of the existing IDR, PSLF, and other COVID-19-related waivers into law to make the fixes permanent and ensure that more borrowers are eligible for relief.47 Moreover, since the administration’s proposed PSLF changes will not take effect until July 1, 2023, it will be important for the administration to extend the PSLF waiver until the new regulations take effect, preventing a gap in coverage. Congress can also complement the administration’s proposed PSLF regulatory changes by making changes that allow workers who provide public services at for-profit entities to qualify for PSLF and by having states and municipalities play a role in deciding which professions help meet regional and local needs and thus qualify for PSLF.

Also read

Beyond this, the federal government should provide borrowers with the opportunity to have a portion of their loans canceled every year or over a period of years. While student loan repayment should not be a life sentence, borrowers should not have to wait upward of 25 years to have their debts canceled under these federal programs. Instead of offering loan forgiveness only at the end of repayment, PSLF could cancel a certain portion of a borrower’s balance for each year they are in public service.48 The federal government already uses a similar approach in the Perkins Loan Program, where a certain amount is discharged for certain public servants for every year they are in qualified service, and some state loan forgiveness programs provide interim cancellation as well.49 Congress could also provide interim cancellation for IDR—possibly after every three to five years of repayment—for certain categories of borrowers (such as those who never graduated or earned a credential).

In addition to IDR and PSLF reform, Congress could create an economic hardship fund. While IDR, deferment, and forbearance options limit the amount a person is required to pay each month, that reduced payment does not necessarily cover both interest and principal, causing balances to grow over time. An economic hardship fund would allow the Department of Education to make monthly payments on behalf of struggling borrowers, regardless of participation in IDR. Congress could use the remaining balance of the TEPSLF program to establish this fund. TEPSLF was created in 2018 to fix the underlying problems of PSLF, but since the administration has issued a waiver and TEPSLF has not lived up to its purpose, it’s not clear that this program, as currently constructed, should continue. Congress could rescind the unspent balance—which as of June 2022, was around $540 million50—and then make a new appropriation for an economic hardship fund. This would have no added cost to the federal government, and neither the House nor the Senate Appropriations Committees proposes additional funding for this program in FY 2023.

Default in our stars: Removing default from the higher education system

If President Biden cancels $10,000 in debt for low- and moderate-income student loan holders, a sizeable portion of those who defaulted will have their federal student loan debt completely wiped out. This is because many borrowers who default on their loans carry balances below $10,000.51 When a borrower defaults on their federal student loans, the consequences are severe.52 Their credit score is severely affected, they may be subject to having their wages garnished, and any tax refunds they could have been entitled to through programs such as the earned income tax credit, child tax credit, and others will be withheld as well. Moreover, these consequences have a disproportionate impact on Black borrowers.53 While there is a pathway out of default for borrowers called rehabilitation, this process is complicated and takes time.54

However, through a COVID-19 waiver, the Department of Education has temporarily suspended some of the severe consequences of default: withholding tax refunds and Social Security payments, and collections. And for defaulted and delinquent borrowers who have remaining debt beyond the amount forgiven, the department has a plan, dubbed Fresh Start, to place them into good standing once student loan repayments resume.55

While these fixes are a welcome change, they will only benefit borrowers within a certain window. After the waivers expire and borrowers are returned to good standing, it is still possible for current and future borrowers to default on their loans, and it’s not clear that there will be an adequate safety net in place to help them in the future.

Instead of creating government programs and initiatives to help borrowers avoid the consequences of default, Congress should eliminate default altogether. Even without the threat of default, borrowers would still have other incentives to pay back their loans—qualifying for debt discharge through PSLF and IDR, improving or maintaining credit scores, and the ability to qualify for home and other loans. Eliminating default and its consequences long term will likely require action from both Congress and the administration. However, this too could carry a hefty price tag if the Congressional Budget Office sees it as encouraging students to borrow more or to forgo paying back their student loans, resulting in less revenue for the federal government.

Also read


Lawmakers, officials in the Biden administration, and advocates for taxpayers, consumers, and students have an opportunity to harness the unprecedented attention on college affordability and quality that the debt cancellation debate has created. While debt cancellation is seen as a cause of the left, student debt is not an issue that only affects the lives of Democrats; it also affects Republicans, Independents, and everyone in between. President George W. Bush worked with a Democratically controlled Congress to sign the College Cost Reduction and Access Act into law in 2007,56 which created the Public Service Loan Forgiveness program, and former Sen. Lamar Alexander was an enthusiastic supporter of efforts to hold colleges accountable by containing costs. As such, there is no reason that there cannot be a bipartisan approach to higher education reform, no matter how the November 2022 midterms may reshape Congress.

Congress must return to and lead the conversation about reforming the American system of higher education, with an eye toward preventing the next student debt crisis. While hearings alone will not solve the issues of college affordability and student debt, such a dialogue is necessary to continue to shed light on the systemic problems and possible solutions that the country can pursue.57

There is an opening, too, for a presidential commission on college affordability and higher education reform. Such a commission would bring together policy experts, students, borrowers, and other stakeholders to discuss what reforms are needed to address the cost of college, the student debt crisis, and higher education reform more broadly, including the ideas mentioned within this report and others.

To ensure that the door to educational and economic opportunity is opened wide, policymakers must act swiftly to implement reforms that will make college affordable through a focus on accountability for quality outcomes and new investments that support those reforms. These will in turn ensure that debt does not weigh heavily on today’s students and those seeking educational opportunities in the future. With the recommendations outlined above, the federal government can restore the promise of higher education as an affordable and accessible path to economic success and a better life for those who seek it.


The author would like to thank Patrick Gaspard, Mara Rudman, Jesse O’Connell, Marcella Bombardieri, Seth Hanlon, Sofia Carratala, Lauren Vicary, Will Beaudouin, and Meghan Miller for their help, guidance, and contributions to this report.


  1. Public Agenda, “America’s Hidden Common Ground on Public Higher Education: What’s Wrong and How to Fix It” (New York: 2022), available at
  2. Raj Chetty and others, “Mobility Report Cards: The Role of Colleges in Intergenerational Mobility” (Cambridge, MA: National Bureau of Economic Research, 2017), available at
  3. National Student Clearinghouse Research Center, “Spring 2022 Current Term Enrollment Estimates,” May 26, 2022, available at
  4. U.S. Department of Education, “Education Department Approves $5.8 Billion Group Discharge to Cancel all Remaining Loans for 560,000 Borrowers who Attended Corinthian,” Press release, June 1, 2022, available at
  5. Federal Student Aid, “Federal Student Loan Portfolio,” available at (last accessed July 2022).
  6. Justin Schweitzer, “How To Address the Administrative Burdens of Accessing the Safety Net” (Washington: Center for American Progress, 2022), available at
  7. Ben Miller, “The Continued Student Loan Crisis for Black Borrowers” (Washington: Center for American Progress, 2019), available at
  8. Congressional Black Caucus, “Congressional Black Caucus Issues Statement on Student Loan Debt Crisis,” Press release, May 20, 2022, available at
  9. Office of Federal Student Aid, “Federal Student Aid Portfolio Summary,” available at (last accessed August 2022).
  10. U.S. Department of Education, “President’s FY 2023 Budget Request for the U.S. Department of Education: Student Loans Overview” (Washington: 2022), available at
  11. Ibid.
  12. The Double Pell Alliance, “#DoublePell,” available at (last accessed July 2022).
  13. U.S. Department of Education, “President’s FY 2023 Budget Request for the U.S. Department of Education: Student Financial Assistance” (Washington: 2022), available at budget23/justifications/o-sfa.pdf.
  14. Ibid.
  15. FUTURE Act, Public Law 91, 116th Cong., 1st sess. (December 2019), available at
  16. These amounts do not include recissions to offset changes in mandatory spending.
  17. Consolidated Appropriations Act of 2022, Public Law 103, 117th Cong., 2nd sess. (April 2022), available at
  18. Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2023, H.R. 8295, 117th Cong., 2nd sess. (July 2022), available at
  19. Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2023, S. 4659, 117th Cong., 2nd sess. (July 2022), available at
  20. U.S. Bureau of Labor Statistics, “College tuition and fees increase 63 percent since January 2006,” available at (last accessed July 2022).
  21. U.S. Department of Education, “President’s FY 2023 Budget Request for the U.S. Department of Education: Free Community College” (Washington: 2022), available at
  22. U.S. Senate Committee on Health, Education, Labor and Pensions, “Risk-Sharing / Skin-in-the-Game Concepts and Proposals” (Washington: 2015), available at
  23. Ibid.
  24. Ibid.
  25. Kim Dancy and Rachel Fishman, “More Than Tuition: Opening the Door to Greater Transparency and Helpful Oversight to Ensure Students Can Afford College,” New America, January 26, 2021, available at
  26. Ben Miller, “Now Is the Time to Fix Cohort Default Rates,” Center for American Progress, October 27, 2020, available at
  27. Ibid.
  28. U.S. Department of Education, “Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program,” Federal Register 87 (41878) (2022): 41878–42010, available at
  29. Office of Postsecondary Education, “Issue Paper 3: Gainful Employment” (Washington: U.S. Department of Education, 2022), available at
  30. Meghan Brink, “Biden Pushes Gainful Employment to Spring,” Inside Higher Ed, June 23, 2022, available at
  31. Carolyn Fast, Peter Granville, and Tiara Moultrie, “Cosmetology Training Needs a Make-Over” (Washington: The Century Foundation, 2022), available at
  32. Through, career seekers can search for apprenticeship programs by occupation. Apprenticeship programs for massage therapists are available at (last accessed August 2022). Apprenticeship programs for barbers are available at (last accessed August 2022).
  33. Office of Sen. Elizabeth Warren, “Education Department Responses to Data Request by Senator Warren, April 2, 2021” (Washington), available at (last accessed August 2022).
  34. IRS, “Topic No. 456 Student Loan Interest Deduction,” available at (last accessed August 2022); Legal Information Institute, “Terms and conditions of loans, 20 U.S. Code § 1087e,” available at (last accessed August 2022).
  35. Federal Student Aid, “The U.S. Department of Education offers low-interest loans to eligible students to help cover the cost of college or career school.”, available at (last accessed August 2022).
  36. U.S. Department of the Treasury Bureau of the Fiscal Service, “Treasury Notes in Depth,” available at (last accessed August 2022).
  37. Legal Information Institute, “Terms and conditions of loans, 20 U.S. Code § 1087e.”
  38. National Association of Student Financial Aid Administrators, “Protecting Borrowers & Advancing Equity: Systemic Solutions To Improve Federal Student Loan Servicing & Repayment” (Washington: 2022), available at
  39. Office of Postsecondary Education, “Issue Paper 3: Interest Capitalization” (Washington: U.S. Department of Education, 2021), available at; Consumer Financial Protection Bureau, “What is negative amortization?”, available at (last accessed August 2022).
  40. Sarah Sattelmeyer, “Borrowers’ student loan balances are growing over time. And it’s not just because of the interest rate.”, New America, May 12, 2022, available at
  41. Bureau of the Fiscal Service, “The General Fund,” available at (last accessed August 2022).
  42. Treasury Financial Experience, “Revolving Fund Account,” available at (last accessed August 2022); Treasury Financial Experience, “Account Establishment,” available at (last accessed August 2022).
  43. U.S. Government Accountability Office, “Federal Student Aid: Education Needs to Take Steps to Ensure Eligible Loans Receive Income-Driven Repayment Forgiveness” (Washington: 2022), available at
  44. U.S. Government Accountability Office, “Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion” (Washington: 2019), available at
  45. U.S. Department of Education, “Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program.”
  46. U.S. Government Accountability Office, “Federal Student Aid: Education Needs to Take Steps to Ensure Eligible Loans Receive Income-Driven Repayment Forgiveness”; U.S. Government Accountability Office, “Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion”; U.S. Department of Education, “Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs,” Press release, April 19, 2022, available at; Federal Student Aid, “PSLF Waiver Offers Way to Get Closer to Loan Forgiveness,” available at (last accessed August 2022).
  47. Recently, members of Congress introduced H.R. 8330, the Simplifying and Strengthening Public Service Loan Forgiveness Act of 2022, which would codify aspects of the department’s waiver and make other changes to the PSLF program. Strengthening and Improving Public Service Loan Forgiveness Act of 2022, H.R. 8330, 117th Cong., 2nd sess. (July 2022), available at
  48. For an example of how this could work, see H.R. 4724, the Strengthening Loan Forgiveness for Public Servants Act. Strengthening Loan Forgiveness for Public Servants Act, H.R.4724, 117th Cong., 1st sess. (July 2021), available at
  49. Higher Education Student Assistance Authority, “Loan Redemption Programs,” available at (last accessed August 2022).
  50. As of June 2022, the Federal Government has provided approximately $285 million in TEPSLF relief to borrowers. However, since FY 2018, Congress has appropriated $825 million for this program. See Federal Student Aid, “Public Service Loan Forgiveness Data,” available at (last accessed August 2022).
  51. Ben Miller, “Who Are Student Loan Defaulters?” (Washington: Center for American Progress, 2017), available at
  52. Pew Charitable Trusts, “Student Loan Default Has Serious Financial Consequences,” April 7, 2020, available at
  53. Miller, “The Continued Student Loan Crisis for Black Borrowers.”
  54. Federal Student Aid, “Rehabilitated Loan,” available at (last accessed August 2022).
  55. U.S. Department of Education, “Biden-Harris Administration Extends Student Loan Pause Through August 31,” Press release, April 6, 2022, available at
  56. College Cost Reduction and Access Act, Public Law 84, 110th Cong., 1st sess. (September 2007), available at
  57. Days before the publication of this report, the Congressional Research Service outlined a series of policy considerations related to federal student loan debt cancellation, which may or may not present useful information for Congress to consider in the aftermath of debt cancellation. See Congressional Research Service, “Federal Student Loan Debt Cancellation: Policy Considerations” (Washington: 2022), available at

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.

Author of the report

Jared C. Bass

Senior Vice President, Education

Author of the foreword

Jesse O’Connell

Former Senior Vice President, Education


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