From the US Department of Education:
The U.S. Department of Education today announced its Office of Federal Student Aid (FSA) will resume collections of its defaulted federal student loan portfolio on Monday, May 5th. The Department has not collected on defaulted loans since March 2020. Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education. This initiative will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default.
While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden-Harris Administration refused to lift the collections pause and kept borrowers in a confusing limbo. The previous Administration failed to process applications for borrowers who applied for income-driven repayment and continued to push misguided “on-ramps” and illegal loan forgiveness schemes to win points with borrowers and mask rising delinquency and default rates.
The main talking point seems to be invoking PPP loans from the middle of Covid and how since those didn’t have to be paid back, student loans shouldn’t have to be paid back either.
The counter-argument to that is something to the effect of “PPP loans were to cover payroll and some other business expenses because it would have been worse for businesses to close than for them to have been paused”.
When the pandemic ended, the businesses could start back up and no problem. The PPP loans did their job (and the only theoretical problem were the non-businesses who got loans and spent the money on non-business stuff). In theory, the PPP loans were spent to keep the business alive.
Student loans, on the other hand, resulted in a student degree that, in theory, makes the individual student potential earning power worth that much more over the lifetime of having the degree.
Unfortunately, as the cost of college went up, that potential earning power got bigger and bigger bites taken out of it.
And now we get to wrestle with the question: “What to do with a loan for a degree that wasn’t worth it?”Report
“What to do with a loan for a degree that wasn’t worth it?”
We have institutions and experts who can answer that question, they’re called “bankruptcy judges”. Make these loans dischargeable in bankruptcy and a lot of these moral hazards and other issues go away.Report
That will result in people not getting loans and, presumably, not going to college at all.
Or, instead of going to their preferred SLAC, they’ll go to a state school. Or, instead of a state school, they’ll go to a community college.Report
Not giving loans to people who we’re pretty sure won’t be able to pay them back is a good thing, not a bad thing.Report
Most of this is meaningless pap since Trump and the Muskrats have eviscerated the Dept. of Education’s staffing and thus have eviscerated said Dept’s ability to collect or pursue on the debtors.
Likewise they’ve fished up the IRS and we’re looking at half a trillion in lower tax collection but that’s probably okay because the people cheating are higher income non-wage earners and thus “deserve” to keep the money in right wing parlance. How right wingers can straight facedly claim the mantle of fiscal conservatives after W is beyond me but this, surely, permanently disqualifies them.
As to the question of student debt itself- forgiveness is overwhelmingly a transfer from quiet poorer taxpayers to noisier and wealthier/future wealthier former students so I’m very skeptical of it on those grounds. Likewise higher ed is becoming a waste fest with administration proliferating like kudzu and forgiving those loans would simply be throwing more money down that rathole so I remain very skeptical that it’s either good policy and certain it’s bad politics as long as higher ed is the way it currently is. Though, again, the rights “answer” to this seems to be to simply to install right wing politically correct rules and nakedly steal everything that’s not nailed down in the institutions they get their hands on rather than feathering their nests genteelly like the current higher ed usual suspects do. So not much of an improvement.Report
The 5th is, what? 12 days away? If we don’t hear anything, I guess the automatic payments won’t have kicked in.Report
Oh I have no doubt they can restart the automatic systems etc, but in terms of actively pursuing debtors or otherwise performing the operations of a coherent Department of Education? Probably a lot the same as the IRS.Report
I wouldn’t say I’m surprised exactly but the failure and/or inability to think things through at a basic level is impressive.Report
“The truth is, these are not very bright guys, and things got out of hand.”Report
“That’s why you shouldn’t give them a mortgage’s worth of debt without the ability to pay it off after four or five years of drinking beer.”Report
The 5th is today.Report
eviscerated the Dept. of Education’s staffing and thus have eviscerated said Dept’s ability to collect or pursue on the debtors.
If memory serves, the proposals to eliminate the Dept of Education included shifting student loan administration to the Treasury Dept. More importantly, it’s possible to make collection a priority.Report
With many of these things you could come up with a rational explanation and hypothetical approach to consolidation of government functions that would make sense. However I think it is fair to notice that is not what’s been happening. Instead it’s a haphazard shutting off of functions and firing people (sans Congressional mandate, naturally) without thinking through ramifications, right up until they’re trying to re-hire people they canned a few weeks prior.Report
Perhaps proposals to eliminate the Dept. Of Education would have such contingencies but, of course, no actual legal proposal to eliminate the Dept. of Education is on offer in Congress so instead we have this shambolic mess.
You can squint at a car crashed into a tree and say “there were proposals to make an appointment with a scrap yard so that car was disassembled and its constituent parts sold and then some return on the car would be possible” but in light of the car being literally crashed into a tree and not being disassembled in an orderly fashion I don’t see what this observation contributes. It’s not a non-sequitur… is it some form of cope?Report
Ro Khanna is now tweeting about it:
It’s like this weird “broken windows” fallacy come to life.Report
Sometimes it’s easy to believe the Trump Administration cannot be stupider, and then it goes and drags out something like this and you remember who you’re talking about.
We can, perhaps, argue about student loans in some other universe, if we should collect them or not, it was an interesting argument before the election.
But…we do understand the economy is about to collapse, right? I’m not kidding about that. Prices about to leap, shortages are going to happen, things are about to get pretty bad as high China tariffs and the 10% on everyone else go into effect. The half-empty ships are already on the way. Things are about To Happen come June 1st.
But don’t worry as prices skyrocket and businesses start failing, the Federal government is _also_ going to resume taking loan repayments from your bank account!
This is just…astonishingly implausible, and I don’t really have any other words for it, despite ‘implausible’ not really being applicably to things literally happening in actual real life.
I could say inconceivable, but that feels like a Princess Bride joke.
I can’t even figure out the words for this sort of behavior. It is extremely hard to come up with any sort of coherent understanding of the Trump administration besides ‘fascism that is determined to saw their own legs off and throw themselves into lava’.Report
Imagine loan payments being suspended for this or that in your own life.
Is there *EVER* a time that you’d think was good enough for them to kick back in?Report
I’m not really talking at the individual level. Obviously people have had payments paused generally don’t want them to resume, although they mostly understand that they will.
My point is that governments, and this government especially, needs enough people, enough powerful people, to conclude that it is not best for this government to be burn to the ground.
It is somewhat amazing watching just how incoherent this version of fascism is, about how it does target its enemies with laser-like precision, as fascism should, but then seems very unclear about how it shouldn’t harm the Real American Volk who are supposed to be on its side, and just sort of scatter shots harm towards everyone!
This is because of how incoherent conservative politics was that led into this, which decided things like ‘people who went to college’ and ‘young people asking for jobs that paid enough to live on’ and ‘women saying things’ were the enemies. A revolving door of enemies that probably included every single person at some point in time, whatever was the most politically useful enemies to have at any given moment.
And then it elect someone like Trump, who doesn’t understand basic economics of any sort and cannot be reasoned with even by his own party. And who takes all the enemy list seriously, and doesn’t have a problem with having 90% of the US population be enemies!
People, fascist people, I don’t know why I have to explain this to you, but the law is supposed to bind but not protect out-groups, and you got that right, but it is supposed to protect but not bind the in-groups, and you’re failing at the protect part!Report
As I said in 2016: Trump doesn’t scare me particularly. The guy who comes after Trump? Yeah. He’s the scary guy.Report
The guy who came after Trump was Biden. Did you find him scary? Or did you mean Trump II?Report
Trump has not been succeeded yet.
But he will be.Report
As I’ve joked serious-seriously, you could write a plausible time-travel story where the concentration of more and wealth in less and less hands, the complicit media refused to explain where the problems are but continue to ‘blame literally anyone else, like immigrants’, and of course blaming Hillary because she got elected in 2016 results in politics becoming completely broken, or even more broken, by 2020.
So in 2020, or maybe 2024, a charismatic and extremely intelligent fascist leader gets elected, wrapped in the flag and carrying a cross. He does not make anywhere near the same mistakes as Trump, he works tirelessly but competently to erode all safeguards in the system. The constitution is continued to be slowly eroded under the guise of ‘terrorism’, and ‘protestor’ is treated functionally the same, and the elections are not even slightly free, but all that happens slowly by the _end_ of his term, not spending an entire term doing nothing because he was managed like a toddler, and then doing a bunch of really dumb stuff instantly in his second term.
And by 2050, the US has managed to competently and slowly oppress a large chunk of the rest of the world…possibly not outright conquering, but via puppet governments and threats.
…and the time travelers ask themselves ‘How we derail this?’ and look around, and, hey say, Donald Trump (Who in the original timeline tried to become Mayor of NYC under fascism and flamed out spectatularly.) is a giant idiot, what happens if we get Obama to piss him off and run in 2016?
This might be the good timeline, people.Report
I mean, yes, it could be worse. Trump could be competent, smart and evil instead of incompetent, stupid and dully malevolent.Report
Eh, word is Bessent is privately and probably illegally confiding to the titans of industry that Trump is going to fold like a cheap suit on the tariffs. So full on economic calamity may be averted, just tons of economic damage for *checks notes* less than nothing.Report
It doesn’t actually matter if he folds. The ships from China are still sailling empty because they are unsure what tariffs are going to be paid when they get here. There’s going to be a month period of shortages, which coincidentally will time itself perfectly with student loan repayment.
Meanwhile, countries are pulling focus to other places, prices are going to rise here because they cannot trust us to buy their goods. Those places may make them less profit, but it is a known consistent profit and they don’t have to worry about the random vagaries of the whim of the US president.
Meanwhile meanwhile, a lot of small businesses that rely on cheap goods from China to stay in business, have already decided to shut down, and more of them will fold, before all this gets fixed. Which will work great for concentrating wealth even more in the super rich, but isn’t going to help the actual economy much.
None of us have any idea how much actual damage will happen, but it could indeed be a full-on economic calamity. Or not. Who knows.Report
Don’t get me wrong, it’ll be an utter fiasco but if Trump folds, which I expect he will, we’ll get just a bunch of terrible economic outcomes (historically bad most likely) but I think they’ll fall short of a genuine economic collapse.Report
“None of us have any idea how much actual damage will happen, but it could indeed be a full-on economic calamity.”
yeah, all those people whose business is “resell drop-shipped stuff on etsy or Amazon or off of a table at a ‘handmade crafts’ fair” will have a tough time!Report
We have changed our economic policy on imports an average of twice a day since this started. It’s impossible for business to follow the law.
It’s even impossible for our allies to make deals with Trump because he fired the people who would normally handle that and he’s not honoring the deals he personally worked out last term.
No one is willing to invest right now. This is a firehose of chaos.Report
https://www.nytimes.com/2025/05/01/us/politics/trump-cryptocurrency-usd1-dubai-conference-announcement.html
“Sitting in front of a packed auditorium in Dubai, a founder of the Trump family cryptocurrency business made a brief but monumental announcement on Thursday. A fund backed by Abu Dhabi, he said, would be making a $2 billion business deal using the Trump firm’s digital coins.
That transaction would be a major contribution by a foreign government to President Trump’s private venture — one that stands to generate hundreds of millions of dollars for the Trump family. And it is a public and vivid illustration of the ethical conflicts swirling around Mr. Trump’s crypto firm, which has blurred the boundary between business and government.”Report
Ethical conflicts and blurred lines. How cute.
Try full on corruption in the open.Report
Yes. It’s his equiv of TCF.Report
They should set it up so that paying for your student loans with Trumpcoin gets a 10% extra payment.Report