The Student Debt Reset

Abstract

Between March 2020 and September 2023, the federal student loan system existed in a state of suspended animation: borrowers did not have to make payments and interest did not accrue. This unplanned experiment was also unprecedented. And it provided enormous relief for student borrowers. It also created the space for the Biden Administration to attempt a second, massive experiment in student aid: the implementation of a sweeping array of changes to the federal aid system. One initiative, the mass cancellation of indebtedness for tens of millions of borrowers, attracted the most popular attention and greatest partisan opposition, in part because it resulted in a dramatic Supreme Court decision. But the effort at cancellation was only part of a broader set of regulatory actions that would have collectively restructured the student loan system. They would have, that is, had they not been stymied by courts and undone by a new administration.

This Article provides an account of the Biden reforms and an analysis of their vulnerability, situating the changes made during the payment pause in a broader history of the development of the federal system of higher education finance and the politics surrounding it. We argue that the pre-COVID federal student aid system was incoherent, consisting of institutions focused on maximizing debt collection and minimizing cost while at the same time managing a motley mix of largely ineffectual programs intended to ease the burdens of indebtedness. The Biden reforms would have largely attempted to resolve the tensions in favor of the burden-easing programs, pushing the existing system as far as possible toward the longstanding center-left goal of making the student loan system a "grant-and-tax" regime. Though unsuccessful, the effort itself has changed the politics of student debt moving forward. For one thing, its failure means that any future effort at progressive reform must go through Congress (or await judicial reform). For another, the increasingly partisan battles over federal aid policy have empowered new actors and made the politics of higher education finance less insider-driven, more volatile, driven by right-wing skepticism of any centralized government involvement and left-wing skepticism of the usefulness of debt.

Keywords: student loans, student debt, consumer law, department of education, biden administration, administrative law, consumer finance, higher education