June, 2025
Washington — Two months ago, Secretary of Education Linda McMahon announced that the Education Department will resume collecting on defaulted student loan debt, so it does not become a burden on taxpayers. She wrote that willingly incurred debt must be repaid when due, or collection tools such as wage garnishments will be employed.*
So far, so good under the law. Also, the timing of the announcement was appropriate because Covid-related repayment pauses have expired. This should have taken no one by surprise, as it conforms with statements from the previous administration.
However, she did not address student loan debt unwillingly incurred through loan servicer error, abuse, or incompetence. If your local credit union tried to over-collect on a loan balance created by its own mistakes, you would go to your county attorney or state consumer protection office to report it, perhaps even charge the financial institution with fraud, and get resolution. But what happens if the lender is the federal government and the collection agent is a servicer that badly botched your student loan? Is the Education Department going to collect on the amount you unwillingly incurred, with its draconian collection tools?
Which raises the question of how much student loan debt has actually been unwillingly incurred. For the past two years I've been trying to estimate the amount. Inquiries to the Department have not yielded answers, even when I have suggested methods to determine at least orders of magnitude.
Turning to AI for help, I get answers ranging from "billions" to "tens of billions" of dollars. AI also explains how it arrives at estimates of unwillingly incurred student loan debt, which is helpful as it corroborates some of my own estimates. AI relies on reports of multiple sources to look at issues such as outright miscalculation errors, how borrowers were systematically steered away from acting in their own best interests to reduce and cancel debt under borrower benefit programs, and schemes that advantaged servicers or lenders at the expense of borrowers. Borrower complaints I have received also suggest significant amounts of debt have been incurred as the result of false certification of eligibility, especially in the Parent PLUS program.
Whatever the explanation, unwillingly incurred student loan debt is a remarkably large amount. An AI description calls it "massive". Collecting on it will needlessly ruin many people, and their families, financially.
What is the procedure for borrowers who want to repay only debt they willingly incurred? There seems to be none — at least none being offered — despite existing statutory authority for the Secretary to settle and compromise debt. The current administration's Department of Government Efficiency has eliminated offices and personnel previously assigned to consumer protection and debt resolution.
Let me again suggest a fair and efficient partial remedy, both for taxpayers and borrowers. Borrowers who repay original principal and simple interest should have any remaining balances cancelled, inasmuch as those balances are not due taxpayers but artifacts of varying degrees of maladministration of the student loan program. The statutory authority is 20 U.S.C. 1082. This would also significantly simplify student loan administration going forward, by closing many accounts.
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"Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education." --Secretary Linda McMahon, April 21, 2025.