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The student loan debacle is about to hit the crisis stage. Who’s to blame?

Nine Million Borrowers at Risk

CNN notes Student Loan Delinquencies Poised to Hit Record Highs.

Student loan delinquencies are poised to hit record highs, and more than 9 million borrowers could see their credit scores tank in the first quarter of this year, according to new data released Wednesday.

The 2025 Student Loan Update showed that an estimated 15.6% of federal loans — a new record — were likely past due at the end of last year, with more than $250 billion in delinquent debt held by 9.7 million borrowers.

The New York Fed’s estimates are based on Federal Student Aid data available through September 30, 2024. The FSA’s fourth-quarter data is expected to be available after March 31, researchers noted.

New student loan delinquencies have been shown to take massive bites out of credit scores, with deductions averaging 87 points for subprime borrowers and steep 171-point knocks for those with superprime, or excellent, credit standing.

The pandemic provided a reprieve for millions of student loan borrowers, as stimulus checks and payment pauses allowed many of them to bring down their balances. Others’ loans, however, were stuck in limbo and became a political football as the Biden administration’s plans for student loan forgiveness hit a wall of legal challenges.

The 3.5-year payment pause ended in September 2023; however, an additional provision under the Biden administration provided a one-year “on-ramp” where borrowers were shielded from negative effects of a missed payment.

That grace period ended on September 30, 2024; and, based on the New York Fed’s findings — indications that many borrowers were not paying their loans at the same rates as they were pre-pandemic — the potential for negative credit score impacts grew greater.

The latest data shows that student loan debt is becoming more of a burden at a time when the Trump administration’s actions — including dismantling the Department of Education and temporarily halting income-driven repayment applications — could further complicate borrowers’ abilities to manage their debt.

Department of Education Reinstates Income-Driven Student Loan Repayment Plans

The Oregon Chronicle reports Department of Education Reinstates Income-Driven Student Loan Repayment Plans

One month after officials at the U.S. Department of Education abruptly stopped accepting new applications for income-driven student loan repayment plans; they’ve changed course.

As of Wednesday, the agency’s student aid website once again allows federal student loan borrowers to submit online applications for income-driven loan repayment and loan consolidation. Such applications are needed to participate in several loan repayment and forgiveness plans that millions of Americans have used to manage repayment for nearly two decades.

Department officials said in a news release that they stopped accepting and processing applications for a month so that they could ”substantially” revise the income-driven loan repayment application. They say the application needed changes following a temporary pause on one repayment plan — the Saving on a Valuable Education, or SAVE plan — that has been on hold since Republican attorneys general sued in 2024.

Plans that were affected by the stoppage include the Pay As You Earn, or PAYE, program and the Income-Contingent and Income-Based repayment plans. Each of these plans limits monthly repayments to a specific percentage of a borrower’s discretionary income, and each sets out a term of repayment that ends with loan forgiveness after 20 to 25 years of regular repayment.

More than 12 million student loan borrowers rely on all of these plans, according to U.S. Department of Education data, and more than 1 million borrowers had applied for income-driven repayment plans that were still processing as of the Feb. 24 application take down, according to Wyden spokesperson Hank Stern.

The SAVE plan, at issue in litigation brought by Republican attorneys general and frozen since June 2024, made it easier for low-income borrowers to meet monthly repayment terms, requiring they pay nothing if their annual income is $30,000 or less. It also limited the amount of interest that could be collected on loans and forgave loans after 10 to 20 years based on their size. The Republican attorneys general ordered this was beyond the authority of the education agency.

Court Ruling Affirms Blocking of SAVE Plan

Please note a Court Ruling Affirms Blocking of SAVE Plan While Next Steps for the Program Remain Uncertain

In the spring of 2024, a federal court issued an injunction preventing the U.S. Department of Education (ED) from fully implementing the Saving on a Valuable Education (SAVE) repayment plan. Since that ruling the program’s fate has remained uncertain, and now that the 8th Circuit Court has affirmed the blockage of SAVE it is unclear whether borrowers will be able to remain in the payment plan.

Following the federal ruling in the spring of 2024, ED was barred from canceling loans eligible for forgiveness under the SAVE, Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans.

By July 2024, the 8th Circuit Court of Appeals blocked the SAVE plan in its entirety which led to borrowers who were able to enroll in the program being placed into an interest-free forbearance, where they have remained since.

On February 18, 2025, the 8th Circuit Court of Appeals issued its long-awaited ruling, siding with the Republican-led states that filed suit against former President Biden’s administration. The court upheld the injunction, continuing to block the SAVE plan in its entirety, including the forgiveness provisions, which subsequently blocked the administration from processing forgiveness for borrowers enrolled in PAYE and ICR plans as well.

Notably, the ruling also directed the lower court to strengthen the injunction, stating that the block on the SAVE plan should be broader. The decision explicitly ordered the lower court to enjoin both the full SAVE plan ruling and what has been referred to as the “hybrid rule.”

I Side with the Court and Republicans

Biden repeated flouted the Supreme Court in his attempts to cancel student debt.

On June 30, 2023, I commented Flouting the Supreme Court Ruling, Biden Sets Student Debt Repayment to Zero for Many

President Biden is already attempting to circumvent the common sense Supreme Court ruling that struck down his student debt cancellation program. Expect more legal challenges.

Supreme Court Smacks Biden

On the same date, I commented Supreme Court Strikes Down Student Debt Cancellation, Cites Nancy Pelosi

Today the US Supreme Court wisely struck down President Biden’s executive power garb that usurps powers granted by the Constitution to the legislative branch of government. The 77-Page Supreme Court Decision was 6-3.

Enough is Enough

The Supreme Court finally had enough of Biden’s nonsense.

Perhaps you think student debt should be cancelled. I strongly disagree. But that is not the point. The point is, as Nancy Pelosi understood: “People think that the President of the United States has the power for debt forgiveness. But he does not have that power.“

You may believe in student debt cancellation, but you should not believe nor want presidents taking matters into their own hands with powers they do not have. Both Trump and Biden have taken such actions, but Biden far more often than Trump.

This effort by Biden, to the tune of $400 billion, was clearly unconstitutional.

Since when do presidents get to spend $400 billion without any such law being passed by Congress? Try never, as it should be.

Nonetheless, President Biden says “This fight isn’t over.”

Biden on Student Debt Cancellation: “The Supreme Court Didn’t Stop Me”

Sure enough, on February 6, 2024, Biden bragged “The Supreme Court Didn’t Stop Me”

President Biden is bragging the Supreme Court didn’t stop him from handing out still more inflationary free money.

$130 Billion and Counting, Costs Nothing

…There you have it folks, $130 billion with another $25 billion smack in the face of a smack down ruling by the Supreme Court, costs “nothing”.

Here’s free money, now vote for me. And best of all, it doesn’t cost anything.

Austin borrower sues Education Department after monthly student loan payments increase by over 300%

KUT News reports Austin borrower sues Education Department after monthly student loan payments increase by over 300%

[Mish note: This is superseded given the online access is restored, but the details are interesting and worth discussing]

An Austin lawyer is suing the U.S. Department of Education for preventing borrowers from repaying their federal student loans based on their income.

Ashley Morgan, 35, has been enrolled in an income-driven repayment (IDR) plan for the last eight years but when she tried to recertify her income last month, she couldn’t. She said that without warning the Education Department removed the income recertification forms and applications for IDR plans from studentaid.gov. As a result of losing access to this type of plan, she said, her monthly student loan payments more than quadrupled from $507 to $2,463.

“This lawsuit seeks to hold the Department of Education accountable for pulling the rug out from under a student loan borrower and removing her option to repay her loans pursuant to an income-driven repayment plan,” Morgan’s court filing states.

Morgan said she reached out to the Education Department, her loan service provider and her congressional representatives. She also filed written complaints with the Office of Federal Student Aid and the Consumer Financial Protection Bureau. When none of those options resolved the issue, she filed the federal lawsuit last week against the department and Secretary Linda McMahon.

In response, an agency spokesperson shared a news release announcing it had reopened online applications for income-driven repayment plans. While the SAVE Plan remains unavailable, the department said borrowers can apply for Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment Plans. According to acting Under Secretary of Education James Bergeron, the applications were revised in the wake of the Eighth Circuit’s ruling.

Biden-Sponsored Credit Crisis

I commented on Biden flouting the Constitution and Supreme Court rulings at least a dozen times.

Contrary to those who think I only object to Trump taking liberties with the constitution, there you go.

And I accurately predicted Biden would ultimately lose.

The sad thing is Biden convinced millions of borrowers they would not have to repay a dime. So don’t blame Trump for this credit fiasco.

Despite being warned in advance, by Nancy Pelosi, President Biden kept upping the ante with more and more delays culminating in debt forgiveness for at least 16 million borrowers.

Now the proverbial S hits the fan.

Trump’s handling of the Department of Education leaves much to be desired. They still have to process the loans. And some of the forgiveness plans were signed into law and are definitely valid. I do not know if the Austin case above is one of them.

If so, Ashley Morgan and others have seen their monthly student loan payments more than quadrupled. They had no one to reach out to. That’s a side note.

Who’s to Blame?

Give Biden 100 percent of the current blame for this mess. He convinced millions of borrowers their loans would be cancelled.

For those who want to go back further, the Bankruptcy Reform Act of 2005, signed by President Bush, made student loan debts not dischargeable in bankruptcy. That’s arguably the true origin of the crisis.

But what about students?

Going tens or hundreds of thousands of dollars into debt for worthless degrees is ridiculous.

So take all of these points into consideration and assign the overall blame accordingly.

Related Posts

On March 19, I asked Should Congress Eliminate the US Department of Education?

The answer to the question is yes, of course. Let’s discuss why.

On March 20, I commented Trump Signs Order to Eliminate the Education Department, Here Comes the Court

Expect another court battle that Trump will mostly, but not entirely, lose.

Trump has no legal authority to shut down the department, but it can move functions.

And the administration can legally block Biden’s ridiculous and unconstitutional SAVE program. Regarding SAVE, the Court made the obvious correct ruling. I would have been surprised if it didn’t.

However, borrowers can still apply for Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment Plans.

Anything Congress specifically funded will survive.

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