Written by: Mike Senecal
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
Key Takeaways
-
Although the Biden administration forgave more than $180 billion in student loans for over 5 million borrowers, new borrowing in 2021-25 outstripped those efforts by more than $120 million.
-
Americans now owe more than $1.62 trillion in student loans.
-
Subprime prospects and customers will likely face stricter repayment terms and reductions in forgiveness options as President Donald Trump and the slim Republican congressional majority gear up for systemic student loan change.
Americans who use federal income tax vouchers to send their kids to private secondary schools also tend to believe that government-funded tuition help should stop once students enter college.
This irony, which is rooted in the American culture of self-improvement, is bolstering congressional and Donald Trump administration efforts to reverse some of the student loan relief measures put in place by the Biden administration between 2021 and 2025.
Those efforts are likely to decrease the available subprime customer base because of the extra pressure to pay off loans.
The Trump administration plans student loan changes that could reduce the subprime borrowing base.
Overall, changes would likely worsen financial outcomes for subprime borrowers while potentially benefiting institutions or those able to manage their debt.
The numbers are spectacular. The New York Fed’s Q4 2024 Household Debt and Credit Report, which revealed that total student debt was at $1.62 trillion, supports the belief held by Trump and many Republicans in Congress that reform is long overdue.
Other outlets report even higher totals. In January 2025, the Education Data Initiative reported that more than 42.7 million student loan borrowers, including those with both federal and private loans, owed more than $1.77 trillion (using data compiled from multiple primary sources).
Stemming the Tide of Student Loan Debt
Another irony is that the Biden administration’s efforts, admirable though they may have been, weren’t enough to stem the tide.
Although the Supreme Court killed the administration’s ambitious $400 billion plan to mass-cancel student loans, the Biden White House ultimately forgave more than $180 billion for more than 5 million borrowers.
“Since Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I’m proud to say we have forgiven more student loan debt than any other administration in history,” Biden said in a statement announcing the final round of cancellations.
Relief came through public service loan forgiveness that benefitted borrowers with jobs in the government and nonprofit sectors. Through Borrower Defense to Repayment, Biden also assisted students who reported false marketing claims.
Other relief came through revisions to income-driven repayment plans, which offer forgiveness after a set period of qualifying payments.
It wasn’t enough. Students bound for higher education institutions borrowed more than $300 billion during Biden’s term, putting the system even further behind the eight ball than it was before the Democrats took office.
Republicans generally want to make student loan borrowing harder to reduce federal spending, limit government intervention in higher education, and discourage excessive borrowing that they argue contributes to rising tuition costs.
Making student loan borrowing harder could harm the subprime lending industry by reducing the pool of eligible borrowers, potentially limiting opportunities for subprime lenders to offer loans to students who cannot access federal loans.
Coming Changes in Student Loans
As we approach the one-month mark in the Trump administration, the president and his colleagues in Congress are working in a dynamic environment where outcomes remain uncertain.
Nevertheless, the president and Congress have made clear how they see reforms to shake up student loans progressing.
Dissolution of the Department of Education: The centerpiece of Republican efforts to recast the federal government’s relationship with the educational system lies in the debate around the Department of Education.
The president has expressed intentions to dismantle the agency and redistribute its responsibilities to other federal agencies and to state governments. This move could impact federal oversight of student loans, financial aid programs, and civil rights protections in education.
“I’d like it to be closed immediately,” Trump said recently.
Ending Public Service Loan Forgiveness: The Public Service Loan Forgiveness program offers forgiveness to borrowers who work in qualifying public service jobs and make monthly payments according to a qualifying repayment plan.
The Trump administration may propose to end that program. Public sector workers, a significant portion of whom are often subprime borrowers, would lose a route to debt relief, increasing financial strain.
Revising Income-Driven Repayment Plans: Proposed modifications to income-driven repayment plans would increase costs for borrowers and potentially lead to more extended repayment periods and higher total debt.
That could put some student loan borrowers in repayment cycles they can’t extricate themselves from, according to one critic of the idea.
Taxation of Scholarships and Endowments: Some in Congress would like to go further by taxing college scholarships and increasing taxes on university endowments.
These moves, aimed at offsetting the cost of extending tax cuts implemented during the first Trump administration in 2017, seem likely to lead to higher educational expenses for students and families.
It’s a good idea to rein in some of the excesses of the federal student loan system, which seems locked in a synergy with colleges and universities that causes costs to rise higher than inflation. The perhaps unintended consequences for the subprime lending industry may result in fewer prospects with the qualifications to participate.
