February, 2026
Washington — Questions and Answers about the Taxpayers' Choice Student Loan Solution (see previous post about a new alternative), with assistance from AI:
Q: Would this amendment interfere with the main purpose of S.3761, which is to provide alternative loans given the federal cutbacks to Grad PLUS and Parent PLUS?A: No. The amendment is complementary, not competitive, and actually provides the financial foundation for the main purpose of S.3761. While S.3761 aims to help states fill the gap left by federal PLUS loan cutbacks, this amendment ensures those state agencies have the "balance sheet health" and "market trust" to do so effectively. This amendment does not interfere with S.3761; it acts as the financial engine that makes it possible. By clearing out the "zombie" debt of the past, we restore the credit of families and provide state agencies with the market scale they need to offer better, cheaper alternative loans for the future.
Q: Why would congressional Democrats support this amendment?
A: Democrats would support this because it provides real debt relief to the people who need it most, fixes a broken servicing system, and stimulates the local economy—all while using a legally solid, bipartisan plan that doesn't cost the taxpayer a dime.
Q: Why would congressional Republicans support this amendment?
A: Republicans would support this because it cleans up the government’s balance sheet, stops the waste of tax dollars on expensive administrative fees, and uses efficiency to fix a system they believe the federal government is currently failing to manage.
A: The Taxpayers’ Choice Student Loan Solution does not rely on either Fair-Market or dynamic scoring. Instead, it stays strictly within the established Federal Credit Reform Act (FCRA) framework to ensure it is legally and budgetarily "no-cost" to the government. Under the Higher Education Act (Section 459A), the Secretary of Education is only authorized to sell loans if the sale results in "no net cost" as measured by the government’s own accounting rules. Since the federal budget is legally mandated to use FCRA, the sale must use FCRA to be authorized. FCRA calculates the value of a loan based on the present value of the money the government expects to collect. By selling the loan at this "Book Value," the government receives 100% of its projected revenue immediately in cash, which the Congressional Budget Office (CBO) records as a deficit-neutral event. Unlike "Fair-Market" scoring, which focuses on investor risk, the FCRA approach allows the government to subtract the discretionary servicing fees (the $3–$4 per month paid to private contractors) from the loan's cost. This "Administrative Offset" makes the sale mathematically profitable for the Treasury without needing to predict complex secondary economic growth (dynamic scoring). Using FCRA allows the government to value the loans based on its own cost of funds, which is much closer to the low-cost, tax-exempt rates used by the state entities buying them. Dynamic scoring (predicting future tax revenue from borrowers) is often dismissed by budget hawks as "speculative." By using FCRA, the amendment relies on hard cash flow data, making it much harder for skeptics to challenge the "no-cost" certification. By sticking to FCRA, the amendment uses the government’s own math to prove that selling "zombie" debt to the states is a better deal for the taxpayer than keeping it on the federal books for 30 years.
Q: What is GAO likely to think of this amendment?
A: The GAO is likely to view this amendment as a high-potential "structural correction" to a dysfunctional system, provided the Integrity Standards are strictly enforced. The GAO has repeatedly flagged "significant deficiencies" in how the federal government estimates the value of student loans. The GAO has criticized the high cost and poor oversight of federal private contractors. They would likely find the "Administrative Offset" (subtracting servicing fees from the sale price) to be a logically sound way to reflect the true "cost of ownership" to the taxpayer. The GAO would likely view the Federal Integrity Standards as essential safeguards to prevent the kind of "servicer mismanagement" they have documented in previous federal contracts.
Q: What is CBO likely to think of this amendment?
Q: What would the Supreme Court think of this amendment if it reached them?
A: The Supreme Court would likely view this amendment as a legally durable and constitutionally sound mechanism for student loan relief, as it directly addresses the "separation of powers" concerns that led the Court to strike down previous executive-led programs. In Biden v. Nebraska (2023), the Court ruled that the Secretary of Education lacked the authority to cancel debt because Congress had not provided a "clear statement" authorizing a program of such "staggering" economic and political significance. The Difference: This amendment is that clear statement. Because it is a statutory asset sale explicitly authorized by an act of Congress (amending S.3761), it satisfies the Court's requirement that major policy shifts must rest with the legislative branch, not administrative agencies. The Court historically respects the government's right to manage its own property and assets. By framing the transfer as a sale of federal assets to state entities under the Higher Education Act, the amendment follows established commercial and property law. This is a standard exercise of Congressional power over federal assets, making it much harder to challenge than the "waive or modify" interpretation used in previous years. The conservative majority on the Court often prioritizes the "sanctity of contract." By focusing on the Principal-First Audit, the amendment argues that the original financial contract has been fulfilled. It provides a form of restitution for documented servicing errors—a concept the Court recognizes in other areas of law—rather than a "blanket" forgiveness of all debt regardless of payment history.
Q: Which state entities are likely not to qualify because of their records?
A: Under the Federal Integrity Standards of the proposed S.3761 amendment, several major state and quasi-governmental entities are likely to be disqualified from purchasing federal loan portfolios due to recent history of administrative failures, federal sanctions, or consumer protection violations. The following entities are currently most likely to fail the required 36-month "clean record" audit. MOHELA (Missouri Higher Education Loan Authority): As of February 2026, MOHELA remains under intense scrutiny. In late 2024 and early 2025, the Department of Education withheld payments and stopped awarding new accounts to MOHELA due to a massive backlog of Income-Driven Repayment (IDR) applications and failure to send timely billing statements to over 2.5 million borrowers. They also face ongoing lawsuits for allegedly failing to process promised discharges for students of predatory for-profit schools. PHEAA (Pennsylvania Higher Education Assistance Agency) / AES: Despite the CFPB withdrawing a specific 2024 lawsuit in early 2025, PHEAA (operating as American Education Services) has faced multiple recent enforcement actions for illegally collecting on debts discharged in bankruptcy and failing to respond to borrower relief requests during the pandemic. A judge as recently as September 2025 barred them from collecting on thousands of private loans that borrowers claimed were discharged. Navient: While formerly a major federal servicer, Navient was effectively banned from federal student loan servicing by the CFPB in late 2024. The bureau ordered them to pay $120 million and prohibited them from most federal loan activities due to years of "steering" borrowers into more expensive repayment options. In the context of the Taxpayers' Choice Student Loan Solution, Navient is strictly excluded because it is a for-profit entity with a history of regulatory violations, whereas the program is designed exclusively for high-performing state-affiliated nonprofits.
A; Advocacy groups that have historically fought against student loan sales would likely support this amendment because it transforms a "sale" into a mechanism for restitution and consumer protection. Why Their Skepticism Shifts to Support: Historically, these groups opposed sales because they feared aggressive private collections. This amendment flips that script: the primary legal mandate of the sale is to discharge debt for anyone who has paid their original principal, providing a "circuit breaker" for the interest-trap that disproportionately harms Black, Latino, and rural borrowers. The "Anti-Bad-Actor" Filter: By explicitly barring entities with poor records (like MOHELA or Navient) and for-profit corporations, the amendment addresses the "servicing nightmare" concern. It ensures only high-integrity, mission-driven nonprofits can touch the data. The inclusion of Section (g) provides a safety net that never existed in previous sales attempts. If a state fails to deliver the promised "Paid in Full" status, the federal government reclaims the loan, ensuring the borrower is never left worse off. Fixing the "RAP" Trap: Advocacy groups recognize that under the 2026 Repayment Assistance Plan (RAP), many low-income borrowers face 30 years of interest accrual. They see this amendment as a faster, legally bulletproof "exit ramp" that bypasses the Supreme Court’s previous objections to executive-led cancellation.
A: The Taxpayers’ Choice Student Loan Solution addresses the intergenerational debt trap highlighted by experts like Stephen Burd, Peter Granville, and Rachel Fishman by providing a structural fix for Parent PLUS loans. It combats "infinite interest" and restores retirement security by enabling state-led buyouts that terminate Social Security garnishments and prioritize principal-first repayment, correcting what experts identify as predatory federal lending practices.
A: Rural borrowers are statistically more likely to have "some college, no degree" with small balances that have ballooned due to interest. The Principal-First Audit provides immediate relief to these borrowers who have often already repaid their original small "seed money" but remain credit-constrained. Agricultural Stability: For young farmers, high student debt is a primary barrier to securing USDA or Ag-lending equipment loans. Clearing the "zombie" interest from their credit reports immediately improves their Debt-to-Income (DTI) ratio, allowing them to invest in the machinery and land needed for rural productivity. The "Reciprocity Provision" (If a State Has No Qualified Entity):
To ensure that a borrower’s relief isn't dictated by a "geographic lottery," the amendment includes a National Reciprocity Clause. The "Adoption" Model: If a state (e.g., Mississippi or West Virginia) does not have a "Certified" entity or its agency is disqualified due to a poor record (like MOHELA), a high-performing agency from another state—such as VSAC (VT), MEFA (MA), or RISLA (RI)—can "adopt" that state’s residents. This ensures that the economic stimulus is national. No rural borrower is left behind simply because their home state lacks the administrative infrastructure to manage the buyout.
This amendment to S.3761 provides a critical "clean slate" for veterans and victims of school misconduct by leveraging state-led audits to automate relief that is often stalled in the federal bureaucracy. Veterans are frequently targeted by predatory for-profit colleges seeking to capture their GI Bill funds, often leaving them with "worthless" degrees and high-interest student loan debt. While the VA lacks the legal authority to restore GI Bill benefits after a school's fraud, this amendment allows state entities to use their "Relief Spread" to cancel the veteran's student loans immediately upon acquisition. For veterans in default, the amendment terminates the federal offset program (which can seize tax refunds or military benefits), replacing it with a "Paid in Full" status that restores their credit for VA home loans. For those caught in the "Borrower Defense" backlog, the amendment transforms a multi-year waiting game into a 90-day execution. Under the Federal Integrity Standards of the amendment, the state entity must identify any borrower whose school was subject to a federal misconduct finding and discharge their debt within 90 days. Many victims of for-profit schools have already paid back their original principal through years of involuntary collections. This amendment recognizes that their original financial obligation has been met and clears the remaining "fraud-inflated" interest. For-profit schools are historically linked to higher interest accrual due to longer repayment timelines for their students. Since Black and Latino veterans are statistically more likely to be recruited by predatory for-profit sectors, the Principal-First Audit acts as a targeted wealth-gap correction for these specific communities.
Q: Why is TCSLS better than SAVE or RAP?
Q: What are the provisions for state entities to cancel defaulted, truly uncollectible debt?
A: While the plan creates a rigid "Principal-First" mandate for active borrowers, it intentionally grants entities the flexibility to clear their balance sheets of truly "dead" debt. Under the TCSLS framework, the state entity acts as a rational economic actor. Here is how they use that determination to handle uncollectible loans: The plan recognizes that some debt is truly uncollectible (due to death, permanent disability, or long-term poverty). TCSLS allows the entity to make a business determination to cancel these loans because keeping a "dead" file active costs the entity in servicing fees and regulatory oversight, because the entity bought the debt at a steep discount (e.g., 5–10 cents on the dollar), they can "write off" a portion of the portfolio and still remain highly profitable on the accounts where they do recover the principal, and because itt allows the state to stop reporting "zombie" assets that will never be realized, providing a more accurate picture of the state’s financial health. The entity can determine that a borrower meets "uncollectible" criteria and trigger a Section 108(f) discharge. This is a "mercy" move that is also a "smart business" move, as it removes a non-performing asset. Whether the borrower pays the principal in full (getting a "Paid in Full" status) or the entity determines it is uncollectible (granting a TCSLS Discharge), the debt is legally terminated and the "zombie" interest is killed.
Q: Couldn't Congress just authorize the Department of Education to apply the administrative offset savings to a no-cost determination and write off uncollectible debt to clean up its portfolio?
A: Not really. First, it's much harder for the federal government to write off student loan debt than it is to sell it to a state for write off as the new owner. Second, the Trump administration has its own agenda that includes borrowers paying more under RAP, more garnishments and takings for defaulted loans, and historically more toleration of school and servicer misconduct (meaning less interest in restitution). However, the Trump administration has expressed interest in sales from its portfolio.
Yes. The Taxpayers’ Choice Student Loan Solution (TCSLS) is specifically designed as a non-judicial alternative to bankruptcy, providing the "fresh start" that student loan borrowers are currently denied in the court system. In bankruptcy, a debtor's obligations are discharged to provide a sustainable path forward. The TCSLS mirrors this by declaring that once the original principal is recovered, the "zombie" interest—which often makes student debt nondischargeable in practice—is legally canceled.
While bankruptcy requires proving "undue hardship" (a notoriously difficult legal standard), the TCSLS gives state entities the authority to determine if a loan is "uncollectible." This allows the entity to write off debt based on economic reality rather than forcing the borrower through an expensive and often failing court battle. A bankruptcy filing remains a severe negative mark for 7 to 10 years. In contrast, the TCSLS rewards those who settle their principal with a "Paid in Full" status. This is the "gold standard" for credit reporting, allowing borrowers to rebuild their financial lives—and qualify for mortgages—far faster than a bankruptcy discharge would allow. Importanrly, the TCSLS codifies the discharge under Section 108(f). This ensures that when a borrower reaches their principal-payoff goal or an entity writes off an uncollectible loan, the borrower is protected from the 2026 "tax bomb." This provides the same tax-neutral benefit as a bankruptcy discharge without the legal stigma.
A: In the current 2026 political climate, the Taxpayers’ Choice Student Loan Solution (TCSLS) offers a unique "middle-path" that addresses the core grievances of both parties.
1. The "Fairness" Argument (Bipartisan Appeal) and Fiscal Responsibility: Unlike broad forgiveness, this plan ensures the government is fully reimbursed for the original amount lent. This appeals to conservatives by framing the solution as taxpayer recovery rather than a "handout."
Borrower Relief: It eliminates the "interest trap" and negative amortization, a primary demand of progressives. By capping total payments at the original principal, it ends the phenomenon of borrowers paying for decades and still owing more than they borrowed.
2. Defusing the "Tax Bomb": By codifying the discharge under Section 108(f), the plan removes the political liability of the 2026 tax expiration. Politicians can offer "tax-free" relief without needing to repeatedly pass temporary extensions of the American Rescue Plan tax exemptions.
3. Economic Mobility & Credit Health: The "Paid in Full" status is a powerful political "win." It moves millions of voters from "indebted" to "homebuyer-ready" by improving Debt-to-Income (DTI) ratios. This frames the plan as a pro-growth, pro-housing policy rather than just a debt policy.
4. Administrative Simplicity: Unlike the complex SAVE or IDR plans that require annual income recertification and face constant legal challenges, the TCSLS is a "set it and forget it" model. It reduces the administrative burden on the Department of Education, making it a "common-sense" reform for voters tired of complexity.
