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Monday, March 31, 2025

March Update on Student Debt (Debt Collective)

The federal government is a sh*t show right now. From ICE abductions of pro-Palestine college students to proposed cuts to Social Security and Medicaid, the Trump administration is wreaking havoc on all of our communities.

We want to take a moment and specifically talk about student debt and higher education — work that we’ve been doing for a while now. Here’s some of what we know, what we think, and what we should do:

In recent days, the Trump administration issued an executive order to dismantle the Department of Education. Legally, this cannot be done without Congress, but in practice, this means most of the staff was simply fired. We talked a little bit about what that means for student debtors in this Twitter thread. In short, this makes the student debt crisis much worse.

Shortly after that, Trump ordered the entire federal student debt portfolio — all $1.7 trillion — to be moved from the Department of Education to the Small Business Administration (SBA). The Small Business Administration is another agency within the federal government. That means our collective creditor would still be the federal government. But will this move actually happen? Will our federal student loans somehow end up privatized? There is a LOT up in the air right now, and the short answer is we don’t know exactly what will happen, but we as debtors should remain nimble so we can exercise our collective power when we need to. Moving our student debt from the Department of Education to the SBA would be 1) illegal 2) administratively and practically difficult 3) lead to possible errors with your account.

If you haven’t already, we still highly recommend going to studentaid.gov and finding your loan details and downloading and/or screenshotting your history.

The traditional infrastructure we have long suggested debtors utilize to solve problems with their student debt — the Consumer Financial Protection Bureau (CFPB), the FSA ombudsman team, etc — have either been undermined or outright destroyed. This means there are fewer and fewer ways for us, student debtors, to get answers to problems with our student debt accounts. But we shouldn’t let Congress off the hook — we should make student loans Congress’ problem. They’re elected to serve us and it’s their job to attend to your needs.

Our friends at Student Borrower Protection Center (SBPC) have put together a helpful tool to open a case at your member of Congress’s office.

Lastly, we want to talk about what we mean when we say Free College. Student debt has ruined lives, and will continue to as long as it exists. We shouldn’t have to borrow to pay for college — in fact, we shouldn’t have to pay at all. It should be free. And that’s what we’re fighting for. But our vision for College For All doesn’t stop at tuition-free — it means ICE and cops off campus; it means paying workers, faculty and staff a living wage; it means standing up for free speech; it means ending domestic and gender based violence on campus; and it means universities that function as laboratories for democracy and learning, not as laboratories for landlords and imperialism.

On April 17th, Debt Collective is co-sponsoring the National Higher Education Day of Action to demand our vision of College For All and oppose the hell the Trump administration is causing right now. Find an event near you HERE to participate — or start an event on your own!

And THIS SATURDAY – April 5th –we’re taking to the streets with hundreds of thousands of people across the country to tell Trump and Musk “Hands Off Our Democracy!” They’re stripping America for parts, and it's up to us to put an end to their brazen power grab. This will be one of the largest mass mobilizations in recent history — and we need you in the streets with us. There are hundreds of actions planned, find one to join near you HERE.

Whatever happens in the future, we will be more likely to win if we gird ourselves with each other’s stories and experiences so we can fight together. This is why we built a debtors’ union — the only virtual factory floor for debtors. Debt acts as a discipline and keeps people from joining the struggle for things we care about — but we can increase our numbers and build power by canceling unjust debts. We all share the same creditor and we need to stay connected to one another. Forward this email to a friend or family member and tell them to join the union and our email list so we can stay connected.

In Solidarity,

Debt Collective

Saturday, March 29, 2025

CBO's Revised Student Loan Projections and FSA Operational Costs (Glen McGhee)

The Congressional Budget Office (CBO) has dramatically revised its projections for the federal student loan program, transforming what was once expected to be a profitable government investment into a significant fiscal liability. This report examines the details of these projection changes and analyzes the operational costs of the Federal Student Aid (FSA) program.

The CBO's updated budget projections released in 2024 reveal a stark shift in the expected financial performance of the federal student loan program. These projections represent a significant revision from earlier expectations and highlight growing concerns about the sustainability of current student lending policies.

According to the Committee for a Responsible Federal Budget (CRFB), the estimated federal cost of student loans issued between 2015 and 2024 has increased by $340 billion – transforming from a projected gain of $135 billion in the 2014 baseline to an expected loss of $205 billion in the 2024 baseline15. This represents a complete reversal in the financial outlook for the program over the past decade.

This dramatic shift is particularly evident when examining the changing projections for specific loan cohorts. In 2014, the CBO projected that taxpayers would generate an 11-cent profit for every dollar of student loans issued by the federal government in fiscal year 2024. However, the most recent projections indicate that taxpayers will instead incur a 20-cent loss per dollar of loans issued this fiscal year6.

Looking ahead, the situation appears even more concerning. Over the 2024-2034 budget window, the CBO expects federal student loans to cost taxpayers $393 billion1. This amount exceeds the $355 billion CBO expects to be spent on Pell Grants, the flagship college aid program for low-income students, over the same time period1.

The projected $393 billion cost includes several components:

$221 billion in losses on the $1.1 trillion in student loans the federal government will issue during this period
$140 billion in re-estimates of the losses taxpayers will bear on outstanding loans
$34 billion toward administering the student loan programs6

One particularly concerning aspect of the CBO projections is the growing cost of graduate student loans. These loans are expected to make up around half of new student loans originated in the current fiscal year11. The CBO projects that taxpayers will lose $102 billion on lending to graduate students over the coming decade11. According to the CRFB, graduate school loans are now nearly as subsidized as undergraduate loans and make up half of the cost of newly issued student loans15.

The dramatic increase in projected costs has several primary causes, as identified in the CBO reports and analyses by financial experts.

The primary catalyst for the growing losses is the expansion and increased utilization of income-driven repayment (IDR) plans6. While a borrower repaying loans under a traditional fixed-term repayment plan typically repays more than the initial amount borrowed, a typical borrower using an IDR plan will repay significantly less than the original loan amount6.

The CBO projects that taxpayers will lose between 30 and 48 cents for every dollar in federal student loans issued in fiscal year 2024 and repaid on an IDR plan1. Preston Cooper notes in his LinkedIn post that "the role of IDR plans in driving these costs can't be overstated. CBO generally expects taxpayers to profit on loans repaid through traditional fixed-term repayment plans. But loans repaid on IDR plans will incur losses ranging from 30 to 48 cents on the dollar"1.

The Biden administration's student loan forgiveness initiatives are cited as significant contributors to the growing cost of the program. The House Budget Committee press release states that "$140 billion or over a third of this cost directly stems from President Biden's student loan forgiveness schemes"7. These initiatives include changes to income-driven repayment plans to make them more generous1.

Beyond the projected losses on the loans themselves, the Federal Student Aid (FSA) program incurs significant operational costs to administer federal student aid programs.

According to FSA's 2024 annual report, the agency operated on an annual administrative budget of approximately $2.1 billion during FY 20244. As of September 30, 2024, FSA was staffed by 1,444 full-time employees who are primarily based in FSA's headquarters in Washington, DC, with additional staff in 10 regional offices throughout the country4.

The Department of Education's Salaries and Expenses Overview provides additional insight into how these administrative funds are allocated. The Student Aid Administration account consists of two primary components:

Salaries and Expenses
Servicing Activities

In the fiscal year 2020 budget request, for example, the Student Aid Administration account totaled $1,812,000,000, with $1,281,281,000 allocated for Salaries and Expenses and $530,719,000 for Servicing Activities5.

The latest CBO projections highlight a dramatic shift in the financial outlook for the federal student loan program. What was once projected to be a profitable government investment has transformed into a significant fiscal liability, with taxpayers expected to lose hundreds of billions of dollars over the next decade.

This transformation raises important questions about the sustainability of current policies and the potential need for reforms to address growing costs. The substantial operational budget of FSA ($2.1 billion annually) adds to the overall fiscal impact of federal student aid programs.

As policymakers consider the future of federal student aid, they will need to grapple with balancing access to higher education with fiscal responsibility and ensuring that federal resources are allocated efficiently and effectively.

Citations:

Friday, March 28, 2025

Higher Education Inquirer continues to follow IPO/sale of University of Phoenix

On March 6, 2025, Apollo and Vistria publicly announced a possible IPO or sale of the University of Phoenix. These companies have been trying to sell the University of Phoenix since 2021, but there have been no takers. The owners claim the school is worth $1.5B to $1.7B, but we (and experts we know) are skeptical, given the financials we have seen so far. The University of Phoenix was previously on sale for about $500M-$700M but the University of Arkansas System, the State of Idaho, and apparently other colleges declined the offers.

The University of Phoenix offers subprime education to folks, historically targeting servicemembers, veterans, and people of color. While some students may profit from these robocollege credentials, one wonders what these workers actually learn. The current student-teacher ratio at the University of Phoenix, according to the US Department of Education, is 132 to 1.

The University of Phoenix has faced a number of scandals, sometimes getting away with no penalty, and other times paying large fines.

In 2023 we made a Freedom of Action (FOIA) request to the US Department of Education (ED) to get Phoenix's most recent audited financials. In March 2025, more than 20 months later, we were provided with a 35-page report, audited by Deloitte, with numbers from 2021 and 2022.

HEI has filed a number of FOIAs with ED and discovered that almost 1 million former University of Phoenix students owe approximately $21.6 Billion in student loan debt. In addition, about 19,000 borrowers have had their student loans forgiven as a result of the Sweet v Cardona Borrower Defense to Repayment case. According to ED FOIA 23-02373-F, more than 73,000 have filed fraud claims against the school.

This month the Higher Education Inquirer followed up with a Freedom of Information request with the ED to obtain more up-to-date financial numbers for the University of Phoenix. We hope they will be responsive and timely enough to get the word out to the public.

Borrower Defense Case Goes to US Supreme Court. How will it decide?

On January 10, 2025, the U.S. Supreme Court granted the Department of Education’s petition for a writ of certiorari to review the U.S. Court of Appeals for the Fifth Circuit’s decision in Career Colleges and Schools of Texas v. Department of Education. The Fifth Circuit had preliminarily enjoined the 2022 Borrower Defense to Repayment (BDR) final rule on a nationwide basis. This rule, published on November 1, 2022 (87 Fed. Reg. 65,904), is a key component of the Biden administration’s broader student loan forgiveness efforts.

The Supreme Court’s review will focus on one pivotal question: whether the court of appeals erred in holding that the Higher Education Act does not permit the assessment of borrower defenses to repayment before default, in administrative proceedings, or on a group basis. Notably, the Court will not address the second question posed by the Department: whether the appeals court erred in ordering the district court to grant preliminary relief on a universal basis.

Background and Legal Battle

The lawsuit originated on February 28, 2023, when the Career Colleges and Schools of Texas (CCST) filed in the United States District Court for the Northern District of Texas. CCST sought to enjoin and vacate the 2022 BDR rule, arguing that it creates unlawful processes, serves no legitimate purpose under the Higher Education Act, and constitutes executive overreach by the Biden administration, violating the Department’s statutory authority and the Constitution’s separation of powers.

After the U.S. District Court for the Western District of Texas denied the preliminary injunction, CCST pursued an interlocutory appeal to the Fifth Circuit. On April 4, 2024, the Fifth Circuit overturned the lower court’s decision and, despite the Department’s objections, postponed the effective date of the 2022 BDR rule pending final judgment. The Department’s petition for rehearing was denied, prompting its appeal to the Supreme Court.

What’s at Stake

The Supreme Court’s decision will likely have significant consequences for both borrowers and institutions. If the Court rules against the Department of Education, it could severely limit the scope of borrower defense claims, especially on a group basis, making it harder for defrauded students to receive relief. For-profit colleges and other institutions might feel emboldened to challenge similar regulations and forgiveness measures.

A ruling in favor of the Department, while seemingly less likely given the Court’s conservative majority, would affirm the Biden administration’s approach to processing borrower defenses and may secure loan forgiveness for thousands of borrowers who attended predatory institutions.

The Political Dimension

The timing of this case is crucial. Just days before the Supreme Court granted certiorari, the Biden administration announced the cancellation of loans for 150,000 borrowers—most of which were through the borrower defense process. Shortly afterward, additional forgiveness for income-based repayment plan borrowers and individual borrower defense approvals was announced. However, the future of these forgiveness efforts remains uncertain, as the second Trump administration has signaled intentions to rollback or revise Biden’s loan forgiveness policies.

A Conservative Court’s Approach to Executive Power

Given the Supreme Court’s current composition and its recent track record in cases like West Virginia v. EPA, it seems likely that the justices will scrutinize the executive authority wielded in crafting the BDR rule. The conservative majority may favor a narrow interpretation of the Higher Education Act, signaling that large-scale forgiveness should come from Congress rather than executive agencies.

Conclusion

The Supreme Court’s ruling on the 2022 BDR rule will set a precedent that could define the future of student debt relief and the Department of Education’s authority. For borrowers hoping for widespread relief, the outcome could mean the difference between long-awaited forgiveness and a protracted legal battle. For institutions, particularly for-profits, a ruling against the Department could bolster their resistance to accountability measures.

Thursday, March 27, 2025

Potential Title IV Disruption Catastrophic (Glen McGhee)

Impact of Department of Education Dismantlement on Higher Education Act Programs

On March 20, 2025, President Trump signed an executive order to begin dismantling the Department of Education, a move that threatens to create significant upheaval across higher education's federal support system. While the order cannot immediately eliminate the department without congressional approval, it has already resulted in substantial workforce reductions and signals major changes ahead for the administration of federal education programs 1.

Title IV: The Most Vulnerable and Consequential Program

Among all eight titles of the Higher Education Act (HEA), Title IV federal student aid programs would create the most severe upheaval for the higher education sector if destabilized through the Department of Education's dismantling. Title IV represents the foundation of federal financial support for higher education, administering approximately $111.6 billion in financial assistance to 9.8 million students in FY202211. This massive program encompasses Pell Grants, federal student loans, and work-study opportunities that directly enable student access and persistence.

Financial Impact Scale

The sheer financial magnitude of Title IV makes its disruption particularly consequential. In 2021 alone, 10.5 million students received $125 billion in federal student aid through the Department of Education15. Title IV's Office of Federal Student Aid received the largest departmental budget allocation - over $68 billion, with $20 billion promised for distribution during 20254. This represents the largest financial relationship between the federal government and higher education institutions.

Enrollment Consequences Already Evident

Even small disruptions to Title IV administration have already demonstrated severe enrollment impacts. Recent problems with the Free Application for Federal Student Aid (FAFSA) system implementation led to measurable enrollment declines:

43% of private institutions reported smaller freshman classes
27% noted fewer financial aid recipients
18% reported decreased racial or ethnic diversity in incoming students2

These enrollment impacts disproportionately affect disadvantaged student populations. The FAFSA completion rates dropped nearly 10%, showing how administrative dysfunction can directly reduce educational access2.

Complex Regulatory Framework

Title IV administration involves an extraordinarily complex regulatory structure that would be challenging to transfer or maintain during a departmental transition. The program includes more than 300 pages of regulations, with significant compliance requirements for institutions6. Recent rule changes have created new financial responsibility, administrative capability and certification requirements applicable to institutions participating in Title IV programs7.

Presidential Assurances vs. Implementation Reality

While President Trump has indicated that essential functions like Pell Grants, Title I funding, and programs for students with disabilities would be "fully maintained and redistributed to various other agencies and departments," the implementation details remain unclear1 8. The executive order instructs Education Secretary Linda McMahon to "undertake all necessary actions to facilitate the dissolution" while ensuring continuous provision of services8.

However, the Department's workforce has already been reduced from over 4,000 to approximately 2,000 employees through layoffs and voluntary resignations1 4. This reduction in administrative capacity raises serious questions about the continuity of Title IV program implementation.

Other HEA Titles: Significant but Less Catastrophic Impact

While all HEA titles would face disruption through departmental dismantling, Title IV's combination of massive funding scale, direct impact on enrollments, and regulatory complexity makes its destabilization particularly consequential.

Other HEA titles, while important, would not create the same level of immediate financial and enrollment chaos:

Title I: Provides general provisions and administrative requirements, but lacks direct funding mechanisms
Title II: Supports teacher preparation programs, but with significantly smaller funding scales
Title III: Provides institutional aid for minority-serving institutions, representing important but more targeted support
Titles V-VIII: Offer specialized program support for specific institutional types or educational priorities

Conclusion

The dismantling of the Department of Education threatens all federal higher education programs, but Title IV student aid programs represent the most consequential area for potential upheaval. The scale of financial support, direct impact on enrollment and access, complexity of administration, and early evidence from FAFSA disruptions all indicate that Title IV destabilization would produce the most severe consequences for higher education institutions and students.

While the administration has promised to maintain essential functions, the mechanisms for doing so remain unclear, and the significant reduction in departmental workforce suggests potential administrative challenges ahead. The higher education community must closely monitor this transition to ensure that critical student financial support systems remain functional during this unprecedented departmental restructuring.