Read This! And Make Sense of the Student Debt Madness
An Overview of the Current Student Debt Landscape
“Kafkaesque” is a word used to describe something purposefully confusing, absurd and nightmarish. The term comes from the work of Franz Kafka, particularly novels like The Trial and The Castle in which characters are trapped in endless bureaucracies, forced to navigate opaque systems governed by rules no one can fully explain.
Sound familiar?
For the one in four Americans trying to keep track of their student debt, let alone figure out how to get the debt canceled, this kind of confusion is their daily life.
Loan servicers lose track of how much debtors owe, keeping people on hold for hours. Private lenders deny cancellation even when they’re legally required to discharge debts. The news is full of flood-the-zone-like headlines and social media influencers giving unclear advice. Policies shift, lawsuits unfold, and debtors are left trying to piece together what it all means.
If you felt whiplash just trying to keep up last week, last month or last year — you’re not alone. You’re not a loan.
As debtors and our allies sift through the chaos, it’s critical not to lose sight of the bigger picture: this system is not normal. We’ve been taught to accept student debt as a fact of life, but in many industrialized nations, higher education doesn’t require taking on a lifetime of debt. The power to cancel federal student debt already exists. What’s missing isn’t legal authority; it’s political will. And in the meantime, the student loan system continues to fail borrowers at every turn. The Trump administration’s efforts to roll back oversight and expand predatory, for-profit institutions is only deepening the crisis, putting millions more at risk.
This is why Debt Collective matters. A debtors’ union can provide solidarity, support, clarity and power. We have our eyes on the prize: full cancellation and fully funded public universities where no one is forced into debt for an education!
While we organize for these real solutions, we help each other survive the kafkaesque nightmare we’re currently in. Whether you’re trying to navigate programs like Public Service Loan Forgiveness, make sense of your repayment options, or simply find a space to share your story without shame, organizing with other debtors can change the equation. It reminds us that this isn’t an individual failure, it’s a structural one. And structures can be changed.
Please join us for our upcoming calls at debtcollective.org/events.
In the meantime, we’re happy to share some important, recent updates below.
We promise — although this post is longer than most— it is well worth the read. It is full of helpful and clarifying details. Take the information in strides. Spread the word. Stay informed.
Things will undoubtedly continue to shift but we encourage you to keep in mind: you’re not living beyond your means, you’ve been denied the means to live!
If you have Parent PLUS loans, get out now!
If you have Parent PLUS loans there is something you need to do right now.
Consolidate all of your Parent PLUS loans into a federal direct loan. You can do that here. Make sure you choose every single Parent PLUS loan that you have to consolidate them. Do it today, it only takes a few minutes. But no matter what, do it before the end of March.
Why? If you still have Parent PLUS loans after July 1 you will be trapped in higher monthly payments and excluded from cancellation thanks to Trump’s “One Big Beautiful Bill.” And because the Department of Education says it can take up to 90 days to process an application for consolidation, that means you need to start the process right now. If you wait, then the process is out of our hands, and if it isn’t completed by July 1 you are out of luck. Thanks Trump!
This is only for people with Parent PLUS loans. If you don’t have Parent PLUS loans Trump’s “One Big Beautiful Bill” makes consolidation riskier depending on your situation.
Destroying Everything About Education Except the Debt
The Department of Education announced that they are moving federal student loans to the Treasury. You can read the inter-agency agreement here.
The plan has three phases.
Phase one: Treasury will assume responsibility for servicing defaulted student loans. The way things currently work is that once a student loan defaults, it gets transferred from your normal servicer to something called the Default Resolution Group which only services defaulted loans. If you thought dealing with Nelnet or MOHELA was hell, the Default Resolution Group is even worse, more impossible to reach or deal with, hold times and doom loops that are even worse. Is the plan to fix any of this? No. Are they going to get rid of the Default Resolution Group? No. They are just going to move its supervision to the Treasury.
Phase two: Treasury will take over non-defaulted loans “to the extent practicable” (spoiler alert: none of this is going to be practicable!)
Phase three: Treasury will take over the FAFSA as well as eligibility & enforcement of universities. They are saying the quiet part out loud here. Your school will be supervised by a bank.
There are many things to say about this but we’ll focus on just a few of them:
1. They are going to mess up your account during this transfer
Years ago the CFPB did a study of the errors that made to people’s accounts when 2.5 million were transferred between servicers one out of every five accounts had serious errors introduced. These were not minor errors. It included things like an incorrect payment balance, or missing payments. This happened when a mere 2.5 million accounts were transferred between servicers.
What Trump and McMahon are talking about is transferring over 40 million between government agencies! The errors are going to be much, much worse.
Just this month the Government Accountability Office released a report detailing how many accounts already have gross errors in them, and nobody is auditing them to try to catch and fix these errors. It’s hard to stress just how devastating these errors can be to someone’s financial life. You can spend decades of your life repaying a loan and the government can just… lose all record of these payments and put them back on your balance. Or they can just get your balance wrong in the first place. Or your monthly payment amount is wrong. A transfer of all 40+ million student loan accounts to the Treasury is going to create many more errors.
This is why we are recommending the one practical step people can take is to get their student loan documents to document these errors when they happen. Contact your member of Congress’s website and open up a “case file” with their constituent services office. Do it ASAP.
Here is a very detailed guide on how to do that. They are going to mess up your account. Let’s shut down Congress by forcing every office to un-mess-up your account.
2. Linda McMahon and Trump own the default crisis
There is a tension between Linda McMahon and Trump right now. McMahon wants to restart the brutal debt collection machine and take as much money out of student debtors pockets as possible. Trump’s political instincts understand that this is bad for him. Here’s why: “affordability” is an empty buzzword to most politicians, but they are all pretending to care about it and Trump understands that being the debt collector in chief is bad for him.
There was also a debate as to where to move federal student loans. Trump had previously floated the idea of moving it to the Small Business Administration (SBA), the agency that discharged hundreds of billions of dollars of PPP loans to businesses during the early stages of COVID.
But Linda McMahon (who was the head of the SBA during Trump’s first term) opposed that idea and fought for moving loans to the Treasury instead. It looks like Trump is losing his battles with McMahon. Including the battle of “affordability.” McMahon’s brutal debt collection agenda is winning. McMahon understands that debt is a form of social control. They want to ruin your life.
The real story of “Phase One” of this plan is that we have never seen so many people default on their student loans as we are right now. They are defaulting because people simply do not have the money to pay, and the government is hiking these payments.
See that red line! McMahon and Trump did that!
There is nothing ‘gradual’ about “Phase One.” Defaulted loans make up a massive chunk of the overall student loan portfolio, and it is growing at a rapid pace. They are starting with one of the largest segments of student debt, one of the most difficult to administer, targeting the most vulnerable people who literally don’t have the money to make a payment even if they wanted to.
Treasury has zero experience administering actual loans to people
This deep dive from Protect Borrowers from last year is worth revisiting.
One of the most hilarious phrases in the inter-agency agreement is “to the extent practicable.” None of this is going to be “practicable.” None of this is going to work. The Treasury is about to learn that student debt cannot be made to work no matter how hard they try.
Meanwhile, Democrats are defending a status quo that everyone hates without offering the bold solutions that people are demanding.
Under Biden, the Democrats were cautious and cowardly about acting within the law to cancel student loans. When the people finally forced them to act, they sabotaged the effort by doing it in a half-hearted way that unnecessarily gave the right wing courts a chance to kill cancellation. They didn’t have to do that. An administration that actually wanted to cancel student debt and was willing to be bold within the law could have done so swiftly, without giving the Republican Supreme Court justices a chance to stop them.
You almost have to admire Linda McMahon. Fortune favors the bold, and she is boldly ignoring the law to shut down the Department of Education and the Democrats aren’t lifting a finger to stop her.
The responses from the Democrats mirror their response to the war in Iran. A combination of “but this is illegal!” and “Trump needs to answer questions about how they are going to implement this.” They can’t even muster a strongly worded letter, just statements like this one.
You also have to admire the way that McMahon has trapped the Democrats into defending an indefeasibly cruel status quo. Are the Democrats going to insist that it is very important that the Department of Education is the agency that runs the brutal debt collection machine destroying working class families?
Policy experts underestimate just how much people hate the Department of Education because the Department of Education is the agency that is there to steal every extra dollar you make if you are lucky enough to make a few extra dollars. While the Department of Education is being dismantled it’s no secret that 40+ million Americans aren’t eager to save the agency responsible for acting like a predatory lender..
We do need a Department of Education, but one that actually invests in and supports education. We have never actually had a Department of Education like that, instead we’ve had a department of debt collection.
There are real solutions to our problems. Full cancellation and College For All. Fortune favors the bold, and it is time for us to organize to win these solutions. We are holding a political education series on College For All as a part of our Jubilee School. Register now.
What is going on with the SAVE plan?
If you want to actually understand what is happening, cancel your New York Times subscription and subscribe to the American Prospect. This week David Dayen has a report about the latest developments with the SAVE plan.
We used to be a free country, right?
The latest Academic Freedom Index has just been published. What is shocking is just how quickly American universities shifted from places where you could more or less have the freedom to think and research, to places where you must self-censor even when you haven’t been officially censored by administrators, which is also happening! In some universities it’s not possible to teach Plato. Wouldn’t want to corrupt the youth.
But the other thing worth noting is that although the US fall has been dramatic, it is part of a worldwide trend. The whole world is becoming less free.
Trump’s project to re-segregate America hurts everyone
The Century Foundation has a new report about how the changes to student loans in the “One Big Beautiful Bill” will mean fewer students can afford to go attend HBCU medical schools. This doesn’t just mean fewer Black doctors. One thing the Century Foundation report highlights is the way that HBCU medical schools prioritize the public good in ways that other medical schools do not. It means fewer rural doctors. It means fewer primary care doctors. As an aging boomer generation needs more doctors, they just won’t be there. For those who do attend HBCU medical schools it will mean more private loans, which are already racist-ly designed to offer higher interest rates and fewer approvals to Black students. The “One Big Beautiful Bill” introduces multiple factors that all reinforce each other.
The Department of Education is behind on its homework
Have you been waiting for the Department of Education to process your application for a new payment plan or Public Service Loan Forgiveness? You are not alone! The Department is behind on its homework to the tune of 576,000 applications. That is going to get much MUCH worse if over seven million people in the SAVE forbearance are expected to switch payment plans at some point.
Freedom to think or a place to live?
We all deserve to reach our full potential, to take time to study and figure out who we are, what we care about, what we are curious about. And we deserve a safe place to live. In America all of our basic needs are weaponized against us to force us into debt.
Fortune reports that many parents would rather help their kids pay a downpayment on a house than go to college. Of course only parents with means can do either.
“Twenty-nine percent of parents think helping their kid buy a home is more important than helping them pay for college, and more than half (55%) say it’s a toss-up for either one.”
As housing and education both become increasingly impossible to finance, people are picking and choosing between their basic needs. Which one would you rather do without? This is the richest country in the history of the world. Working class people deserve better.