From the Wall Street Journal, December 9:
A joint settlement, combined with reforms, marks the end of unlawful debt cancellation schemes.
The U.S. Education Department has agreed to a settlement with the state of Missouri, which sued the government in 2024 over the Biden administration’s illegal student loan forgiveness. There’s a serious debate to be had about student loans ballooning out of control, but Democratic politicians have made impossible promises based on illegal maneuvers. Instead of working toward policy reforms to ensure colleges and universities deliver education at a reasonable cost, Democrats churned out debt-forgiveness plans and insisted they could cancel student loans unilaterally.
Nationally, borrowers owe nearly $1.7 trillion in student loans. President Biden gave way to pressure from radicals when he purported to cancel a substantial portion of the outstanding balance. In doing so, he (or perhaps his autopen) flouted the law and tried to saddle taxpayers—many of whom didn’t attend college or paid their own way—with billions in student debt.
Missouri first challenged these attempts at mass student loan forgiveness in 2022. Multiple federal courts held that the administration’s forgiveness plans were illegal. After losing at the Supreme Court in 2023, the Biden administration doubled down on mass loan forgiveness by loading existing income-driven repayment plans with terms that would make loan forgiveness inevitable. The University of Pennsylvania Wharton School’s budget models estimated that this would cost taxpayers $342 billion over 10 years.
This income-driven repayment program, the SAVE Plan, allowed undergraduate borrowers to make monthly payments equal to 5% of discretionary income, which was defined as that portion of their income above 2.25 times the federal poverty line. The plan dramatically shortened the forgiveness timeline for borrowers with less than $12,000 in debt. SAVE was so generous that more than 9 out of 10 borrowers repaying through an income-driven repayment plan were expected to use it. Nearly two-thirds of them were expected to receive loan forgiveness within 20 years. The average borrower would have repaid about two-thirds of what he borrowed, and 4.5 million of the eight million SAVE borrowers would have had a monthly payment of zero. The SAVE Plan was equivalent to a full cancellation for millions of borrowers and, again, everyday Americans would have been left to foot the bill.
Seventeen states joined Missouri in fighting the SAVE Plan—a clearly illegal trick to conjure loan forgiveness out of thin air. Under the Trump administration, the Education Department has worked with Missouri to settle the case in court, and is proposing to end the plan by not enrolling new borrowers, denying pending applications, and moving all borrowers to legal repayment plans. If a federal judge approves the parties’ joint settlement, it will end Mr. Biden’s illegal student-loan bailout.
The Biden administration unfairly strung borrowers along for four years, making promises it couldn’t keep. As Nancy Pelosi acknowledged in 2021, forgiving student loans is a policy call for Congress, not something the president can do by fiat....
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