Student Loan Repayment: What Happened?

Washington DC – President Joe Biden announced at the end of August a proposal forgive up to $20,000 of student loan debt (assuming one received the Pell grant – $10,000 if one did not receive the grant). This proposal originally included the cancellation of student loans held by private companies, as well as those lent by the federal government. However, President Biden’s administration was forced to backtrack on this proposal after the US Department of Education issued a Press release stating that the estimate of this would result in a reduction in government cash flow over the ten-year period to the tune of $305 billion, which is estimated to be approximately $379 billion in 2022 dollars, although this estimate is based on a highly unknown economy and market value.

The Department of Education assumes that 81% of borrowers (through federal student loans) will take the necessary steps to get their relief (up to $20,000 for those who received the Pell Grant).

Thanks to student debt relief, millions of borrowers will no longer have to repay their loans and millions more will be able to significantly reduce their repayments. The Department estimates that over the next 10 years, the program will cost an average of $30 billion per year. The cost over ten years in terms of reduced cash flow to the government will be approximately $305 billion.

Information from the US Department of Education – 2022

So what exactly happened? The original publication of the articles did not differentiate between federally owned loans and federally backed private loans (Federal Family Education Loans Program). However, this is no longer the case, as borrowers who have government-backed federal student loans, but are owned by private lenders, will now be excluded from this one-time relief. This should affect some 770,000 people.

However, some are unhappy with the decision to forgive up to $20,000 in student loans. Six states have filed lawsuits against the Biden administration over the legality of the mass pardon. According to Associated press“The states of Iowa, Kansas, Missouri, Nebraska and South Carolina have joined Arkansas in filing a lawsuit. Iowa has a Democratic attorney general, but the Republican governor of the state, Kim Reynolds, signed on behalf of the state.States argue that the Missouri loan manager faces a ‘number of ongoing financial harms’ due to Biden’s decision to cancel the loans Other states that have joined the lawsuit argue that Biden’s pardon plan will ultimately disrupt state coffers revenue.

“It is patently unfair to burden hard-working Americans with the debt of those who chose to go to college.

The Department of Education is required by law to collect the balance owing on the loans. And President Biden doesn’t have the power to override that.

Leslie Rutledge – Arkansas Attorney General, 2022

The one-time student loan cancellation is also the subject of legal pressure from the Job Creators Network Foundation. They argue that “the Biden administration violated federal procedures by failing to seek public input on the program“. The main argument is one that has already been seen – that President Biden does not have the legal authority to reverse what should be an act of Congress. Another objection to forgiveness is that it would disproportionately help people of color, rather than helping everyone equally.

This bailout is going to affect everyone in this country because of the massive size of the program,” she said. “And everyone should have the opportunity to give their views to the government.” She added: “These universities must be held accountable for this student debt crisis.”


President Biden’s administration claims to have used a law passed after the events of September 11, 2001, which gives the administration “supreme authority” “to reduce or eliminate student debt during times of national emergency,” said the Department of Justice in an August legal opinion. The administration cited the COVID-19 pandemic as its urgency.

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