Biden’s Loan Forgiveness Program Fails Supreme Court Test. What Now?


​​​​​​​​​​​​​​Aired July 13, 2023

Hosts Jon Fansmith and Sarah Spreitzer are once again joined by Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, to talk about what is happening on campuses in terms of financial aid now that the Supreme Court has struck down race-conscious admissions and the Biden administration’s student loan forgiveness plan in back-to-back rulings.

[11:03 AM] Morris, Rebecca

Here are some of the links and references from this week’s show:

dotEDU Live: The Supreme Court’s Ruling on Race and Admissions

Webinar: The Supreme Court Speaks: Understanding the Implications of Race-Conscious Admission Decision

Student Loan Repayment Toolkit

Supreme Court Rejects Race-Based Affirmative Action in College Admissions
The Washington Post (sub. req.) | June 29, 2023

After Supreme Court’s Affirmative Action Ruling, Race-Based Scholarships Under Scrutiny
USA Today | July 6, 2023

Supreme Court Blocks Biden’s Student Loan Forgiveness Program
CNN | June 30, 2023

Biden’s Plan B on Student Loan Forgiveness Relies on Higher Education Act: What to Know
ABC News | July 5, 2022

Inside Joe Biden’s New Student Loan Repayment Plan
Politico | July 5, 2023


 Read this episode's transcript

Jon Fansmith: Hello, and welcome to dotEDU, the higher education policy podcast from the American Council on Education. A little bit later in the episode, we’re going to be joined by longtime friend, excellent colleague, wonderful all around guy, Justin Draeger, the president and CEO of the National Association of Student Financial Aid Administrators, or NASFAA. Justin is a regular guest on our podcast and somebody whose insights we always appreciate, particularly when it comes to the realm of financial aid.

And we’re going to be talking about Supreme Court and two recent cases. People probably tuned into our podcast, our dotEDU Live last week, with ACE’s general counsel, Pete McDonough; our usual co-host, Mushtaq Gunja; and Madelyn Wessel, to talk about the Supreme Court decision specifically as it pertains to race in admissions. If you haven’t already checked that out, definitely recommend it. We’re going to go a little bit deeper into some of the other issues in the other case with Justin later.

But I am joined today by Sarah Spreitzer, who is roasting in her office as we record this. Sarah, besides the heat, how are you doing?

Sarah Spreitzer: I’m good. You failed to mention, Jon, that we’re just doing this podcast to compete with Mushtaq, because I think that his dotEDU Live had the best numbers ever for listenership for our podcast. Everyone tuned in to listen to that.

Jon Fansmith: You’re not supposed to say this out loud.

Sarah Spreitzer: I’m not sure why they’re listening to this one, except that they probably want to hear from Justin.

Jon Fansmith: I mean, I’m sure they want to hear from you too, Sarah.

Sarah Spreitzer: No, I highly doubt that.

Jon Fansmith: Well, we’re here anyway.

Sarah Spreitzer: Glad to be here. Glad to be here.

Jon Fansmith: That’s right. And Justin is always great, so regardless of what you think of us, definitely stay tuned for Justin. But before we get to Justin, we are mid-July, July 10th as we record this. Congress is returning to work after a two-week July 4th holiday. Luckily, very little left on their plate to do for the rest of the year, so they can-

Sarah Spreitzer: That’s sarcasm.

Jon Fansmith: ...Take a couple of weeks off for July 4th and then take all of August off, and just be well set up.

Sarah Spreitzer: Oh, sure. And they have so much time right now before the August recess to get everything done. My favorite bill, the National Defense Authorization Act, is going to move before the recess, and we have all the appropriation bills being marked up. The fun thing about that is that the House and Senate are nowhere near each other on any of the major pieces of legislation, whether it’s on authorizing language. The House NDAA is promised to be filled with lots of social and culture war issues, on things like critical race theory and DEI initiatives and lots of fun things like that. And on the appropriations side, we had under the debt limit deal, which certain members of the Freedom Caucus were not happy with, they decided to go even below the funding levels that were dictated by the debt limit agreement, so they’re going to be really off from whatever the Senate comes out with. Then on top of all of that, they gave themselves an actual deadline this year-

Jon Fansmith: A real deadline.

Sarah Spreitzer: ...Under the debt limit, a quote, unquote “real deadline.” Congress can change whatever they want, right?

Jon Fansmith: Yeah. But it’s got a trigger built into it. They’d have to actively vote to do it, and as you pointed out, the Freedom Caucus was not very happy about the last deal. Could cause problems.

Sarah Spreitzer: Should we make a bet now about whether or not Congress gives themselves a get out of jail free card?

Jon Fansmith: My theory is that they will hit the January 1st ... For people who aren’t as familiar, the deadline we’re talking about, as Congress set as part of the debt limit, if they didn’t finish all their spending, funding the government work for the year, which is supposed to start on October 1st, fiscal year for the federal government starts October 1st. If they didn’t finish it by January 1st, then they would cut spending across the board by 1%, including for defense, which doesn’t get reduced in the current levels. So that is a deadline with teeth, because the implications of missing it are significant. Nobody wants to cut defense spending.

Sarah, you’re shaking your head though, because you don’t believe they’ll actually stick to the deadline. I think, because the people most inconvenienced by doing last-minute deal making at the end of December around the holiday season are staff and lobbyists, that they will push through and find a way to resolve it and meet the deadline. That’s my working theory.

Sarah Spreitzer: Okay.

Jon Fansmith: I am team pro meeting the deadline.

Sarah Spreitzer: Hey, I’m pro meeting the deadline too. I’m just saying I think that they write themselves some sort of get out of jail free card that gives them some flexibility, since it’s all going great already and we’re already in July. I know Congress thinks they have all the time in the world with another six months to resolve all of these issues, but I think they’re already running out of time.

Jon Fansmith: We’re joking, but it is a serious issue. Because if they don’t fund the government, not just is there this possibility of further cuts, since we’re talking level funding, which in a lot of cases actually winds up being a cut for a lot of programs, but we’re also talking about the possible risk of a government shutdown. They don’t fund the government, that’s the consequence. So a lot really importantly at stake, and as Sarah said, there are big differences between what the House and the Senate would spend. It’s about $162 billion in difference between what the House will spend overall and what the Senate will plan to spend overall.

Normally, in any given year, the House and the Senate are within a few billion dollars of each other. It’s a matter of reconciling across a number of bills, a handful of programs, some of what they call anomalies, special cases that need attention. When you’re $162 billion apart, that process looks a whole lot harder, and they are, again, not giving themselves a whole lot of time to deal with it. A lot of possible chaos in our future, right, Sarah?

Sarah Spreitzer: Yeah. Not like we don’t have chaos now, but a lot more chaos coming in the fall.

Jon Fansmith: Yeah. Well, speaking of chaos, we’re going to talk about what is happening on campuses in terms of financial aid decision-making in the wake of the Supreme Court’s decision in Harvard and UNC, as well as what the Biden administration’s student loan forgiveness loss before the Supreme Court will mean for borrowers. I think chaos is a really good word to think about as we keep those in mind. Chaos is really the theme of a lot of things that are going on right now.

One thing that is not chaotic is the recording schedule here at dotEDU, and that is because we know for a fact that this will be our last podcast of the summer. We will return in the fall with news of Congress’ shenanigans and the Department of Education’s regulatory efforts.
Before we get to that point, we will have Justin Draeger join us after the break to talk through what those Supreme Court decisions mean and the ensuing chaos we’re looking at, so hang around for that.

Welcome back. As we said at the top of the episode, we are joined by the first three-time... Three times, right, Justin? Three times?

Justin Draeger: I think this is the third time, yeah.

Jon Fansmith: The first three-time repeat guest, so that makes you friend of the podcast. Podcast regulars. Podcast VIP. I don’t know. We haven’t worked out a term for this yet.

Sarah Spreitzer: We should. You’re in competition with Bill Ferris, right?

Jon Fansmith: Yeah, that’s true.

Sarah Spreitzer: Sorry, Bill Pink. Bill Pink, president of Ferris State.

Jon Fansmith: Bill Pink of Ferris State. Yes.

Sarah Spreitzer: Who’s been on the podcast twice, so shout out to-

Jon Fansmith: And probably won’t return after you mangled his name.

Sarah Spreitzer: No, after I called him Bill Ferris. Shout out to President Pink.

Jon Fansmith: Also happens to be on our board, so really good person to alienate there, Sarah.

Justin Draeger: Well, I’ve had my sights on being your first threepeat since the beginning, so mission accomplished and goal achieved.

Jon Fansmith: Yeah, we have a beautiful gold jacket we’ll give you later too.

Justin Draeger: All right. I’m looking forward to it. Thanks.

Jon Fansmith: Well, we are very happy to have you on, Justin, not just because you’re our first three-time repeat guest, but also because it’s been a little bit of action with the Supreme Court, and it plays pretty strongly into the interests of NASFAA and your members. We’re going to talk about both of the Supreme Court decisions, came out back to back Thursday and Friday, about a week and a half ago as we record this. I think we’ll probably start by talking a little bit about the UNC and Harvard cases around the consideration of race in admissions and then talk maybe in a little bit more detail about what the Biden administration is thinking about student loans and student loan forgiveness with the Supreme Court striking down their program.

Just to get us started, I think people are probably familiar, but a quick recap. Two cases brought by the same group, Students for Fair Admissions. They alleged that the admissions practices at Harvard and at the University of North Carolina Chapel Hill were discriminatory against Asian Americans in particular. The cases went to the Supreme Court, they were joined at the Supreme Court. On Thursday, June 29th, I believe, if I’m getting my dates right, the court essentially found in favor of Students for Fair Admissions against the institutions, and in a pretty expansive decision, struck down consideration of race in admissions.

There is clearly a lot that will still be determined around this decision. I think people are still digging into the decision, looking at their individual institutions’ practices as well as what colleges and universities are doing across the country. But one thing that almost immediately popped up in the wake of this decision was, what is the possible impact on financial aid? Justin, no one tracks financial aid and the impact of federal policy and federal law on financial aid closer than you and your friends and colleagues at NASFAA. You want to tell us initially what your take is, what you’re looking at as you see this decision coming down, what that might mean for your members and for higher ed generally?

Justin Draeger: Yeah, it’s as both these cases, we’re going to talk about two cases today, but we were watching these all through the Supreme Court opinion season, and it became increasingly clear that these opinions were going to be released near the end of the season, which is right when our national conference was happening in San Diego. Our conference started on, that Thursday was our first general session, and then both these cases were released on the opening two days of our conference. We had 2,700 of our members in financial aid, enrollment management, admissions, a little crossover there, in San Diego. We had lots of time to think about this, not a lot of time to react to it, and then some time over the next several days to discuss this.

First and foremost, we wanted to make clear to our members that this was a case that was squarely focused on admissions. Admissions and financial aid go hand in hand, and in a lot of universities they are under the same enrollment management umbrella, but it is focused on admissions. We want schools to take their time in digesting all of this. Attorneys are taking all of their time, and the Supreme Court took months, through a very deliberate process, and schools should likewise take a very deliberate process to comb through this.

There’s going to be lots of spinoffs, and I don’t know, Jon and Sarah, if you guys looked at The New York Times this last weekend, but there was sort of a Q&A in The New York Times with the lead attorney who argued in front of the Supreme Court, and they asked him, “Where do you think this is going next?” And he said, “Well,” he said, “I think employment is one area that will garner greater attention.” But I think he said, quote, “I also think there are some of the things that we associate with higher education,” and he said, “Internships, scholarships, certain research grants, those need to be revisited if they have been race-exclusive,” end quote. So it’s pretty clear that scholarships, research grants, internships, will also be held out for scrutiny.

And this brings me to my second point, which we talked a lot about at the NASFAA conference, which will be, this won’t all be at the federal level. A lot of this will be at the state level, and a lot of the future cases will likely be at the state level. We saw some of that already in Missouri and in Kentucky.

Number three, we urge schools not to overreact. This took months to figure out. Don’t overreact.

We want schools to do a risk assessment, which is point number four. This might help, as you think about your members, college presidents and provosts and those who are in leadership positions. What we’re telling our enrollment managers and financial aid directors is give your campus leadership, give your presidents the information they need to do risk assessments. Do a scan of all of your scholarships. Which ones are taking race into any consideration whatsoever? From a reputational and fiscal risk assessment and a political risk assessment based on where your campus is at and the state political climate, just let them know what’s going on on your campus, and let them know that scholarships can’t be rewritten overnight, particularly if there are donor funds that are caught up in all this.

Sarah Spreitzer: Justin, does that mean aid that’s already been awarded for the fall, or even for the spring of the next academic year, is that safe? Schools don’t need to repackage financial aid packages?

Justin Draeger: I feel like this is the caveat we all have been giving for several months now, which is, one, I’m not an attorney, and most importantly, I’m not any institution’s attorney, and I’m certainly not the attorney in whatever state they’re in. But a court has delivered an opinion. This is usually an opinion as the state and the school’s going to be compliant going forward. Admissions decisions have been made. Financial aid decisions have been made. We don’t necessarily look at this as going back and repackaging. That would be chaotic beyond belief. When we’re talking about compliance with the law in this instance, I think we’re looking at going forward.

But Sarah, I think this does touch on another issue that makes financial aid slightly different than admissions. Schools are dealing often with one seat. And this was argued in front of the court. You have a seat; a student takes that seat. Financial aid’s a little bit different because it’s not necessarily always a zero-sum game. There are dollars that go to some student. That doesn’t necessarily always mean that those are the only dollars at play. Schools have robust fundraising, sometimes they’re moving money around, sometimes they’re able to bring additional dollars to the table to help students in different situations. It does make financial aid just a little more elastic than admissions. It’s just not quite the same, which is why we say this is really a case that was focused on admissions. Financial aid is just a little bit different.

Jon Fansmith: Justin, one of your points, and I’m going to screw up which point was which, but one of your points was, slow down. Don’t start making decisions. I like the idea of start preparing a risk assessment, looking at what your policies are.

One of the other reasons to slow down, something that obviously we all spend a lot of time following, is what the administration is doing in response. They came out pretty vigorously in response to the Supreme Court’s ruling. Keeping in mind the Supreme Court ruled. That is now the law of the land. Their interpretation of the Equal Protection Clause in the 14th Amendment is what is binding. But the administration, in addition to saying that they believe the decision was wrongly determined, said that they’re going to do a few things.

One of them is they’re going to have this convening at the end of the month. I’m blanking on the exact name, but I think it’s the Equity and Opportunity Summit, or something along those lines, apologies to those who spent time crafting the name, on the 26th of July.

But they’re also going to issue guidance. As of last Friday, at least, they said that would be issued within 45 days, so sometime very soon, at the latest mid-August, to institutions on what they can do, practices that are acceptable in the admissions context, and their determination under the new law. Do you expect that they will touch on the issue of financial aid when they do this or this will be, again, as you’ve talked about, very narrowly tailored at the admissions decision-making level?

Justin Draeger: We haven’t received any indication from the White House or the department exactly whether this will be all-encompassing beyond admissions. I don’t have an indication just yet. I hope that they will be providing institutions some cover from what I think schools are just feeling right now, which is an enormous amount of pressure to go beyond admissions, just based on the proponents who were pushing this to go beyond admissions. Besides the lead attorney, others who have been proponents of the suit brought before the Supreme Court have been pushing for this to go far beyond admissions. But the case in front of the court was admissions.

Sarah Spreitzer: I was just going to ask, and this might be a silly question, but seeing the attorneys generals in Missouri and Kentucky already issue notices that schools had to walk back race-based scholarships, is that also impacting private institutions in those states? Obviously, the Supreme Court decision affects publics and privates. When it plays out within the states, is there going to be a difference between the publics and privates, or is it going to impact those institutions in different ways?

Justin Draeger: I think that, again, that’ll be a state by state... There’ll be a fallout state by state on where exactly this plays out. In the public sector, it’s pretty clear that the state has a pretty direct lever that they can pull on exacting what they want out of the public institutions. When it comes to privates, they have a little bit more room, but that’s not to say that, based on which state you’re in, that there aren’t levers that the states can pull.

And this is why I’m awfully careful, while I’m trying to buy cover for any institution who wants to still adhere to the values that they’ve embraced while holding up their mission to educate all students and create a diverse population of students. I’m pretty careful about not castigating any institution that reaches their conclusions because, for a lot of schools, they’re saying, “I can spend a lot of money on defending institutional practices, or I can spend that money on trying to come up with enrollment strategies that still try to adhere and create a diverse population of students.”

There are some schools, and admissions and financial aid directors that I’ve talked to, who say they’re going to have plenty of cover from their institutional president and board to fight legal battles. And there are plenty of institutional presidents and financial aid directors who I’ve talked to that say, “We’re going to keep our heads down, and we want to spend our money squarely on our students.” They’re going to come up with enrollment and financial aid pooling strategies that still try to achieve some of this, but are going to reexamine their policies.

I understand both. I’m not a college president, so I’m not doing those risk assessments. We try to help our aid directors figure out how to provide presidents with the data they need to do the proper risk assessments.

Jon Fansmith: I think that is very helpful. I want to pivot, though, to the other Supreme Court decision area. Maybe the three of us are on a little bit firmer footing in terms of our own professional areas of expertise, but the Biden administration’s student loan forgiveness plan, pretty much as we all predicted, I think, was struck down by the court. Right? Nobody here was thinking it was going to be upheld. No? Okay.

Justin Draeger: Well, I’ve got to tell you, I don’t know, Jon.

Jon Fansmith: All right, okay.

Justin Draeger: Well, let me just say, maybe I’m always the naive one. I just thought the standing thing was really perhaps going to get in the way, because I thought of all these other dominoes that might fall with the standing, but you know what? Maybe it wasn’t an overwhelming amount of feeling on it, but I just thought, “How could they grant the standing?” But you know what?

Jon Fansmith: You weren’t entirely wrong. They dismissed one of the two suits that they brought-

Justin Draeger: Unanimously.

Jon Fansmith: ... For lack of standing. Right, unanimously. You weren’t wrong. It’s just the other one, they did not, and they went ahead and blocked it. To your point, I think that was always the holdout, that they would find a lack of standing, and ultimately they were able to convince themselves that they did. I thought it was very interesting that they referenced Missouri’s loan servicing agency, MOHELA, in the decision, even though MOHELA was not a party to the suit, but they struck it down.

Almost immediately, big week for the Biden administration, right? How many press conferences did we see between Justice, and Education, and the president, and senior members of the White House within about a 48 hour window?

But they also immediately announced a response, and I’ll say one of them was the new income-based repayment plan that’s been in the works. What they’re proposing looks almost exactly what they proposed originally, so very, very similar and not a surprise.

But the one that, I will be honest, surprised me was they announced that they’re going to go back and try and do another loan forgiveness program. Despite the court’s ruling, they’re going to convene a rulemaking session, a process by which the Department of Education puts together regulations looking at a section of the Higher Education Act. Section 432(a), which is often cited in this discussion about loan forgiveness, has some broad language, depending on how you read it, about the secretary’s authority to waive, modify, anyway, make changes to student loans under that section. And they’re going to go back for another bite at the apple.

Reading the opinion of the court when it came out, they seemed very, very adamant that the secretary lacked this authority, and that was under HEROES, which, to my mind, Justin, was much more on point for what they were trying to do than section 432(a) is. But here we go. They’re going to try again. So what’s going to happen here? Dig out the crystal ball. Tell us what’s going to happen here.

Justin Draeger: I guess the first question is, we go back to standing. Who has the standing to sue on this? And if the same players, the state of Missouri, has the standing to sue, which presumably they would because it’s the same damages that they incurred under the first one, they have standing. I would think the same justices who thought the president was exceeding his authority with HEROES might think the president is similarly exceeding his authority with the HEA. In fact, in the chief justice’s opinion, he cited the former Speaker of the House, Nancy Pelosi, as on the record in saying the president did not have the authority previously. I don’t know if this is an exercise in futility, but we’re going to go through all the motions again, and I guess we’ll find out.

However, this was the course that Senators Schumer and Warren originally said the president should have gone through with originally. He should have just used the HEA, and I guess that’s where we’re going this time. To your point, Jon, this is not a quick process. We have to have public hearings, which will be happening on July 18th, and then we’re going to have a negotiating team, and then all the stakeholders have to be called together, which I don’t even know how you determine all the stakeholders, but you do. And then they all come together, and then we determine if there’s consensus and if there’s not, and then we have a regulation, and then, and then...

Sarah Spreitzer: Then that's held for comments, still, right?

Justin Draeger: Right.

Jon Fansmith: Right.

Justin Draeger: Comments, 30 days comments, and then... I assume it’s 30 days, and then we move forward. By the time this is all said and done, and then probably an early implementation, I assume, and then by this time this is all said and done, it’s probably held in the courts. A law-. Yeah, go ahead, Sarah, I’m sorry.

Sarah Spreitzer: I was just going to ask, and obviously neither of you is lawyers, but you try and play them on TV. You can’t really sue as the process is starting. Won’t they have to wait until the rule is promulgated at the end to actually sue, or will they file a case as soon as they assert the rulemaking process?

Jon Fansmith: Same qualifications as Justin, but you have to assert there is some harm. Maybe once a final rule is proposed, you could seek an injunction barring it from being implemented. But until something’s actually... You can’t sue on the idea that something might happen that would be harmful to you.

Sarah Spreitzer: Okay.

Jon Fansmith: Especially without knowing exactly what that harm would be. We’re talking about a process that, at its absolute fastest, is what? Going to be four or five months away, minimum, and likely longer than that?

Justin Draeger: Yeah, because that presupposes there’s an outcome to a regulatory process that hasn’t happened yet. So we don’t have a final rule. Once there’s a final rule, then we know there’s a rule about to be implemented, and then I assume that something can happen. We have to go through this process, and presumably the final rule could be different than what the Biden administration proposed the first time. It’ll be fascinating to see the stakeholders at work in a negotiated package. Let’s not forget through a negotiation, that’s several rounds of negotiation, I assume. Usually, you have several rounds of negotiation.

I don’t even know what could be thrown in, because remember, in a negotiated rulemaking setting, first you agree on protocols. That’s the rules of the negotiation. Then you figure out the agenda of what you’re negotiating. If you think it’s just forgiveness, I think you could end up negotiating all sorts of things, not just the borrowers that... Remember, the proponents of debt forgiveness weren’t exactly happy with-

Jon Fansmith: Ten or twenty thousand dollars.

Justin Draeger: ...The original proposal, right. They were not happy that it was just direct loan borrowers. They weren’t happy with who exactly got in. Maybe even the amounts of debt forgiveness. I suspect between those who are opponents of debt forgiveness, those who are even proponents of debt forgiveness, I suspect there could be serious disagreements through the negotiation, even on the regulation. Then you go through that entire process.

The other thing that’s notable about this is that throughout the entire three years plus of nonpayment, which we’re just concluding, we are now for the first time divorcing loan repayment from debt forgiveness. The Biden administration has continued the Trump administration’s nonpayment pause. We are now divorcing those two things. Now, because of the debt ceiling agreement, borrowers will enter repayment. I put that in quotes, “will enter repayment September 1st.” I put that in quotes because here’s how we think this is going to work.

You enter repayment September 1st. That means interest will start accruing on loans September 1st. First repayment dates will be due in October, and those will be based on historically when your repayment date was. So if my repayment was historically always on the 6th of the month, it will be due October 6th. If it was the 15th, it’ll be October 15th.

However, the Biden administration announced that students, the day that the Supreme Court struck this, they announced borrowers will have 12 months before any negative action is taken on them. Now, that’s not a 12-month extension of no payment. It means, well it could mean, we don’t know exactly, but it could mean you’re just given strung together 12 months of automatic forbearance, which is a technical term that means interest is accumulating, but you’re not reported to any credit agencies for any negative action. You just have interest accumulating. It’s not capitalized, and you’re not reported as delinquent. So that could just go on until 2024, which means then you’re given another 270 days before you default. We’re well past the presidential elections at that point.

Jon Fansmith: They also announced three months following October would also be, there’d be no penalties and no interest accumulating if you didn’t pay. Wasn’t that the...

Justin Draeger: I don’t know about the no interest accumulating, Jon. I guess I’d have to double check that. I think interest starts accumulating because everybody enters repayment.

Jon Fansmith: So they basically bumped it up from three months to 12 months.

Justin Draeger: Yeah, it’s a 12 month onramp, which means no negative action. I just think it’s, if you’re delinquent, I think the servicers are just going to retroactively give you a forbearance. If you go another three months, it’s another forbearance, retroactively, and that just goes on for 12 months.

Sarah Spreitzer: But forbearances add up. That could add to a person’s overall loan debt.

Justin Draeger: Yes. Definitely people will end up... If you make no payment, you’re going to owe more at the end of that 12 months than you did previously.

I don’t know how much credence to give any of this, but then you start seeing things like a debt strike, and some proponents calling for, “We’re not going to, out of protest.” That leaves schools in a weird spot, because if you’re in a financial aid office, remember you are held accountable for whether people repay their loans or at least stay in good standing. What do you tell borrowers who are protesting by not paying their loans because they’re holding out for forgiveness through a debt strike? I think you tell them, “That’s not a good idea. You should repay.” People can still qualify for deferments and income-based repayment and all that. I don’t know. We’re living in a really weird and bizarre time.

Jon Fansmith: Yeah, I was thinking about this too, from a borrower’s perspective. If you were one of the 70 plus percent of borrowers who were eligible for forgiveness under the old plan, and 26 million applied, 14 million were either automatically or their applications were granted by the Department of Education, were told you’re getting some form of loan relief. You fast forward six months and the Supreme Court says, “No, in fact, you’re not getting any loan relief.” Part of the Biden administration’s goal was to get the forgiveness plan in place before repayment resumes, so you could move the borrowers who would be fully covered. It was a large portion of borrowers who actually have all of their debts wiped out under the forgiveness plan.

Then it eases the resumption of repayment because, one, you’re servicing far fewer borrowers. Two, a lot of those low debt borrowers tend to be the people that have the hardest problems with repayments, highest default rates in that group. There’s a lot of administrative procedural reasons for doing that.

But if you’re the borrower, again, now you’re entering a period where the administration is telling you, “No, wait. We are going to come back and do more forgiveness. We don’t know exactly what that’s going to look like, and also, maybe you don’t need to repay your loans for a year while we work through this process.” You may still not be sure whether you’ve had any loans forgiven or not. You may not be very clear on what the future holds for you in terms of other loans that will be forgiven, and you’re weighing the options of repaying, resuming repayment, which for a lot of borrowers will be a challenge after they have not been doing it for a long time. It’s really chaotic.

Justin Draeger: Agreed. If you have been making payments, you’re paying them off in record speed because you’ve had no interest. If you haven’t been making payments, it’s not like you’ve been setting money aside, just waiting for payments to start. You’ve got no room in your budget, probably. This is going to have an impact on you personally. This is going to start, and then you’re going to determine whether you can afford to make any payments. The good news for some borrowers, if they’re paying attention, is that, as you pointed out, Jon, the administration did announce this new income-driven repayment plan, which, God help us, is like another IDR plan, which they’ve now-

Jon Fansmith: But it replaces an existing one, Justin.

Justin Draeger: It does. It does.

Jon Fansmith: It’s just a one-for-one swap. It’s no more confusing than the old situation.

Justin Draeger: But now it’s called SAVE, which, why you would call a repayment plan SAVE-

Jon Fansmith: Can we just talk about the acronym, please, though? Do you know what SAVE stands for?

Sarah Spreitzer: What does it stand for?

Jon Fansmith: Can you say it, Justin?

Justin Draeger: Go ahead. Go ahead, Jon. Do you know?

Jon Fansmith: Saving on A Valuable Education. So you just drop the O, which, this is a Washington thing that always drives me nuts. But when you go to those efforts to make an acronym as your name of a bill or whatever, and then the acronym doesn’t quite work, so you just ignore one of the words in your acronym.

Sarah Spreitzer: So it could have been SOAVE?

Jon Fansmith: Anyway, irrelevant to the policy decision.

Justin Draeger: It could have been SOAVE.

Jon Fansmith: SOAVE.

Justin Draeger: Listen, I don’t think we should call any ... I’m harnessing my energy to the White House or Department of Ed press folks or marketing folks. Let’s not call-

Jon Fansmith: Who I’m sure are listening.

Justin Draeger: I’m sure they are. Let’s not call repayment plans SAVE. Let’s only call things that are, when you’re saving money, let’s call those things SAVE. I just think it’s confusing.

Jon Fansmith: It is.

Justin Draeger: I understand you’re saving people money because the new repayment plan, which is called SAVE, is going to increase the amount of income that’s protected from 150 to 225% of the borrower’s income that’s protected. That’s going to like-

Jon Fansmith: 225% of the federal poverty line.

Justin Draeger: That’s right. So it’s going to translate to $0 monthly payments for 1 million additional borrowers. Borrowers with only undergraduate loans will repay only 5% of their discretionary income as opposed to 10%. It’s going to get rid of negative amortization. If you’re paying down your loan, you won’t have more interest accumulating and growing your loan at the same time, so that’s good. If your original balance was $12,000 or less, you’ll qualify for forgiveness through this IDR plan in 10 years as opposed to 20 years. And there’s some more complicated formulas in there. All of that means that borrowers will be paying less overall for their loans. It’s very generous. It is very generous.

Jon Fansmith: Incredibly generous.

Sarah Spreitzer: So are you saying they’re going to save money, Justin?

Justin Draeger: Don’t. Don’t. Don’t, Sarah.

Sarah Spreitzer: Over the life of their loan?

Justin Draeger: Don’t you dare. I just object, all right? It’s a repayment plan. I don’t think we should call it SAVE.

Jon Fansmith: You can’t see this as you listen, but Sarah leaned very dramatically into the microphone to-

Justin Draeger: Sarah’s trying out for-

Sarah Spreitzer: Out of the Shadows.

Justin Draeger: ...White House Comms plan.

Sarah Spreitzer: Out of the Shadows thing.

Justin Draeger: We could have come up with a different acronym, if nothing else. But anyway, it’s a very generous IDR plan. It’s so generous, in fact, if the administration does not get loan forgiveness, in a way they are getting loan forgiveness. It’s just on the back end in a very confusing... Frankly, we’re all inside the beltway here, and even people working on college campuses. But for the everyday student and borrower, this is a very generous IDR plan, so generous in fact, it is going to be loan forgiveness for a lot of people, just in a very confusing way on the back end.

Jon Fansmith: Which is generally how we seem to do our policy, right?

Justin Draeger: Yeah. It’s the worst kind of policy.

Jon Fansmith: Do it on the back end in a-

Justin Draeger: It’s terrible.

Jon Fansmith: ...Very confusing and hard to navigate way.

Justin Draeger: Yeah, it’s terrible. It does nothing for college access, but it is loan forgiveness. It’s just in a confusing back end way. We’d rather do it through grants.

Jon Fansmith: To your point, I think Virginia Foxx, when they announced the details of the plan, was out with a press release almost immediately calling it backdoor free college.

Justin Draeger: Yeah, that’s a blunt way to put it. Even there are some progressives though, who said that this could be free community college, just it’s a back end way to do it. If community college students were borrowing in greater numbers, which I’m not a proponent of that. I’m not advocating for that.

Jon Fansmith: Right. You’re just saying, “Were that the case.”

Justin Draeger: Yeah, this is going to offer forgiveness for a lot of borrowers who are borrowing $12,000 or less.

Sarah Spreitzer: Not to give anybody any ideas on this, but why isn’t the President’s authority on this new IDR program being challenged if his authority was just stopped by the Supreme Court on broad student loan forgiveness?

Justin Draeger: The president’s authority to alter IDR plans is pretty clear, and I don’t think challengeable in court. The president’s authority to just waive debts, in the numbers that he’s proposing, I think does at least appear with this court to be awfully challengeable. I think that’s the crux of the matter.

Jon Fansmith: The plan it’s replacing was also just created by executive action. It was not a statutory... The REPAYE and PAYE IDR plans were created by executive action. They weren’t in response to congressional legislation. And they’ve been around for, oof, what? Since the Obama administration, so we’re probably 10 or so years into them, right?

Justin Draeger: At one time, call me the forever optimist, Jon, but at one time, I actually thought there might be some bipartisan movement on limited debt forgiveness along with large loan reform. That’s out the window, and it will always be out the window as long as this administration is pursuing debt forgiveness on a large scale by itself. Now, the administration is going to fight on. They’ve made that pretty clear, and it just seems to me that it does suck all of the oxygen out of the room for any large scale loan reform, loan reform that I think we, capital W-E, we Republicans, Democrats, that we all, there’s some things, low-hanging fruit we could all agree on, just can’t happen in this political environment because of the split, the rift that exists because of loan forgiveness policy. I’d love to hear your take.

Jon Fansmith: Maybe I’m the eternally pessimistic person to your eternally optimistic person, Justin, but I just don’t see it happening. I don’t see it getting past the court, even if they finalize a rule while they’re in office, assuming this transition. The low financial value programs, other things, yeah. Maybe that will stick around, maybe it’ll look different. Maybe weighting will be different as to how you determine a low financial value program, but increased scrutiny, increased accountability, especially at the programmatic level, that’s bipartisan. That hasn’t been something that’s pushed by Democrats and opposed by Republicans. That’s always just about the details of how do you do it.

I think we switch administrations, again, we go back into the regulatory whiplash we are on Title IX and we are on everything else, where administrations swing back and forth. We could talk about this for a whole other episode about schisms within the parties and shifts in the electorate and voter bases and priorities and education attainment and all this. But it’s become very clear that the things the Biden administration has now become aggressively pushing on are things that are toxic to Republicans. That moment, if it did exist and we were both right about it, it’s definitely gone for good, at least for the foreseeable future.

Sarah Spreitzer: I could see some sort of legislation having legs, especially with Republicans, when it comes to limiting borrowing, especially based on what your degree is in. We’ve seen proposals that would limit total borrowing, say, if you’re gaining a degree in the humanities, because you’re not expected to earn that much money, and so therefore you likely will have issues paying back your loan. I could see some sort of bipartisan agreement around that because I think all this talk about loan forgiveness doesn’t get to the issue with new borrowers coming into the system, and the fact that there are just unsustainable amounts of student loan debt. I think the Republicans’ way of addressing that is likely going to be mandates on the students and institutions when it comes to borrowing or when it comes to the cost of college.

Justin Draeger: Yeah, I just even see low-hanging fruit around origination fees, which we have. Find me a bill where Senator Warren and Senator Hawley from Missouri are on the same bill. Only one that I know of is getting rid of student loan origination fees. But even moving something like that in this environment, with debt forgiveness on the table, everything seems to get stalled. Funding Federal Student Aid, the office that carries out all the student aid stuff, we can’t even get Federal Student Aid more money to do all the stuff we ask them to do, because debt forgiveness. It makes everything so toxic inside the beltway.

I just for a second thought, “Okay, it’s decided. A lot of people are unhappy. A lot of people inside the beltway were celebrating. Can we just all move on?” And no, we cannot. No, in fact, we’re going to actually make this process even more torturously long, because it’s now going to be regulated.

Jon Fansmith: I was just going to say, it so happens to be an issue that both sides see their bases responding to, and it lasts into an election season.

Justin Draeger: Who I feel for are the borrowers because I do think that they are stuck in a limbo that they cannot decipher or see their way out of. I do think they are stuck.

Jon Fansmith: Yup.

Justin Draeger: And it’s a very opaque, inside the beltway, opaque sort of system that they are struggling to understand, and I do feel for them.

Jon Fansmith: And that’s absolutely the right place to end this conversation on. Justin, always a pleasure having you. Thank you for coming back.

Justin Draeger: It doesn’t always feel like a pleasure to have me, but I’m always glad to be here, so thank you for having me.

Jon Fansmith: Well, then you’re accurately gauging our feelings, but for the audience, I was trying to be polite to you, Justin.

Justin Draeger: Yeah, thank you.

Jon Fansmith: But anyway, always good to see you, and thanks everyone else for listening.

Sarah Spreitzer: As always, you can check out earlier episodes and subscribe to dotEDU on Apple, Google Podcast, Spotify, Stitcher, or wherever you listen to your podcasts. For show notes and links to the resources mentioned in the episode, you can go to our website at While there, please take a short survey to let us know how we’re doing. You can also email us at to give us suggestions on upcoming shows and guests.

Finally, a very big thank you to the producers who helped pull this podcast together: Laurie Arnston, Audrey Hamilton, Malcolm Moore, Anthony Truehart, Rebecca Morris, Jack Nicholson, and Fatma Ngom. They do an incredible job making this happen and making Jon, Mushtaq, and I sound as good as possible. Finally, thank you so much to all of you for listening.

About the Podcast

​Each episode of dotEDU presents a deep dive into a major public policy issue impacting college campuses and students across the country. Hosts from ACE are joined by guest experts to lead you through thought-provoking conversations on topics such as campus free speech, diversity in admissions, college costs and affordability, and more. Find all episodes of the podcast at the dotEDU page.

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