Where DOGE May Get Its First Major Victory
I don’t want to get too far ahead of myself here, but I don’t think it’s unfair to assess that President Biden’s number one goal in higher education was to forgive as many student loans as possible. And he lost—in large part to conservative groups and state attorneys general who stood up and stopped him.
In the early days of the Biden-Harris term, there was no shortage of defeatism among conservatives when it came to efforts to hinder these projects. Many feared that, while the President’s plans were probably illegal, it would be difficult, if not impossible, for anyone to be granted standing to sue, let alone string together enough court victories before the Department of Education pushed the big red button to wipe away loan balances. But lo and behold, standing was granted, and Biden lost in court, again and again. So where does that leave us?
While the COVID student loan pause (which extended far beyond COVID) and other efforts to wipe away loans still proved extremely expensive (easily hundreds of billions of dollars), it could have been far worse.
The first student debt relief effort was estimated by the government to cost $379 billion over 10 years, but the Penn Wharton Budget Model estimated that it would be far higher, between $300 billion and $980 billion over that period. Fortunately, the state of Missouri was granted standing to sue the Biden administration and successfully won at the Supreme Court, forcing the Administration to restart its efforts from scratch. Undeterred, Biden promised to find another authority to forgive loans and embarked on an effort to initiate mass cancellation through a different authority. He also continued his plans to transform student loan repayment into a de facto forgiveness program, which became known as SAVE.
Both the former and latter programs are currently on hold. Eighteen states have won an injunction to pause SAVE, while seven have won a pause of the second attempt at mass cancellation, which the Biden administration attempted to sneak past the courts before they could put a stop to it. A final forgiveness effort, related to so-called “hardship” forgiveness, has not yet been finalized and may not be before Biden leaves office.
So, if these court efforts are successful or the Trump administration manages to kill its predecessor’s policies permanently, how much will conservative policymakers, states, and advocacy groups have saved taxpayers? The answer depends on who you ask, but most agree that the amount is sizable.
According to government estimates, SAVE was estimated to cost $156 billion, the second debt cancellation, $147 billion, and hardship forgiveness, $112 billion (but there might be some overlap between hardship and cancellation, so call it $90 billion). This would mean, according to government estimates, taxpayers could stand to save about $393 billion over 10 years, a figure pretty close to all of our discretionary spending on science, space, and technology.
But the true number may be far higher. In a recent estimate, the Committee for a Responsible Federal Budget puts the number up to $550 billion over 10 years, which more than eclipses federal spending on natural resources and the environment. The incorporation of Penn Wharton’s models, especially on the SAVE program, could put that number even higher. My personal opinion is that the Penn Wharton model is closer to the truth because it does more to estimate the effect of the horrible incentives that forgiveness efforts give schools and students to increase costs and borrowing.
There is still time for the Biden-Harris team to attempt one last brazen effort to forgive loans illegally. If they do, states should be ready to take action, and the courts should be ready to hold the administration to account. But if not, the Trump administration, the Department of Government Efficiency (DOGE) team, conservative advocacy groups, and Republicans in the states will have the opportunity to deliver a massive day-one win to taxpayers.