If you’re confused about President Joe Biden’s various student loan debt-cancellation schemes, who can blame you? And on Tuesday, the Biden administration unveiled its third attempt to make you pay for someone else’s life choices.

First, some background.

In August 2022, the Biden administration announced its initial plan for canceling student loan debt. Borrowers earning less than $125,000 annually would have received up to $10,000 in loan cancellation and up to $20,000 if they had ever received a Pell Grant while they were in college (even if they are higher-income earners today).

That plan was estimated to cost American taxpayers close to $600 billion, which would have equated to more than $2,000 in increased taxes per taxpayer despite most taxpayers having no student loan debt.

Thankfully, the Supreme Court held last June that the Biden administration’s assertion of authority to cancel hundreds of billions of dollars in student loans was unlawful and that the federal Department of Education lacked the jurisdiction to enact widespread student debt cancellation based on the authority it sought from the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act.

But, as Biden recently said, the Supreme Court may have blocked him, but didn’t stop him from skirting the law and violating the separation of powers in new ways.

In January 2023, knowing that its initial effort was facing legal challenges, the Department of Education released new rules related to income-driven repayment of student loans. Income-driven repayment (IDR) is designed to make loan repayment financially manageable for those who need assistance, as it caps a borrower’s monthly payments at a percentage of his or her discretionary income.

The Department of Education’s reimagining of a key IDR program was the second debt-cancellation scheme. Under the new rules, borrowers can enroll in a new IDR plan called Saving on A Valuable Education (SAVE). This plan halves the monthly loan payment from 10% to 5% of nonexempt income. It also increases the threshold for exempt income from 150% to 225% of the federal poverty line.

For example, a four-person household earning $67,500, close to the median income in the United States, would have a monthly loan payment of $0 and eventually qualify for full cancellation. In addition, despite making lower monthly payments, borrowers could qualify for loan cancellation in as little as 10 years, instead of 20 or more, depending on their loan amounts.

Under the new SAVE plan, only 22% of undergraduate borrowers are expected to repay their loans. If the Biden plan is fully implemented, the consequences will be dire, as paying off a student loan in full will become a rarity rather than the norm. Fortunately, Kansas and Missouri recently filed separate lawsuits on behalf of 18 states to prevent the Biden administration from carrying out the SAVE scheme.  

Biden has already contributed significantly to the mounting national debt and to inflation by transferring more than $150 billion in student loan debt to American taxpayers—many of whom did not attend college or who already responsibly paid off their own loans.

While Plan B faces court challenges, Biden announced on April 8 his administration’s third attempt to advance widespread loan cancellation, this time trying to accomplish it through regulatory channels. The president outlined five new categories in which borrowers would be eligible for student loan cancellation:

  • Borrowers experiencing “hardship” in paying back their loans. The term “hardship” remains ambiguous, granting the secretary of education extensive authority to determine its definition and, thereby, eligibility for relief.
  • Borrowers who initiated their loan payments before 2005 for undergraduate loans or before 2000 for some graduate loans. For this group, there is potential for complete debt cancellation. Many of these borrowers are now 20 or more years into their careers and most likely earning far more than they did right out of college.
  • Borrowers who owe more on their loans now due to accrued interest than when they initially began repayment. The department suggests canceling up to $20,000 of accrued interest for all borrowers and canceling the entire accumulated interest for a certain group of borrowers.
  • Borrowers who meet the existing loan-cancellation program criteria, but have yet to submit an application.
  • Borrowers who enrolled in a degree program and later lost eligibility for federal funding due to poor performance or fraud are affected. This provision primarily affects borrowers who attended for-profit colleges.

This plan has been in the works for months, as the department has been undergoing negotiated rulemaking, as required by the Higher Education Act, when developing new regulations under Title IV of the law.

On Tuesday, the Biden administration unveiled its draft proposed rule, which includes four categories above (except for the one about “borrowers who are experiencing hardship”), indicating that a separate draft rule will be released in the coming months with respect to that category.

The proposed rule will be published in the Federal Register on Wednesday, to be followed by a 30-day comment period, during which the public can provide feedback on the rule. A final rule will most likely be published in the fall. The Biden administration has already signaled that it will begin canceling some loans this fall, right before the election.

Under Biden’s proposed rule, many people who have no financial hardship at all, but who delayed payments for some reason, would see their interest canceled.

Even if the scheme were lawful—which it isn’t—it would be badly targeted. Also, the 30-day comment period is too short yet again. Such short comment periods for such large plans—this one is a 279-pager—have been the basis of litigation, such as in the SAVE litigation.

It’s also important to remember that student loan debt doesn’t simply disappear just because it’s “forgiven” by the Biden administration, lawfully or unlawfully. Cancellation is simply a debt transfer from the individual borrower who benefited from attending college to all American taxpayers—the majority of whom did not.

If Plan B fails in court, a lot of borrowers will instead get their loans or loan interest canceled under Plan C, absent a subsequent challenge. Between the second and third plans, we could be talking about $1 trillion, or about $3,000 for every American citizen.

Biden’s schemes to “cancel” debt could potentially result in the most expensive executive action in the history of higher education.

Whether Plans B and C succeed or fail in court, all of these efforts fail to address the more pressing issue of higher education affordability.

Subsidizing student debt and then canceling it does nothing to address the escalating cost of college, but instead adds to the debt burden of the American taxpayers for generations to come and encourages colleges to raise prices even more.