Could Trump Reverse Student Loan Forgiveness That Was Already Granted?

With Donald Trump set to return to the White House in January, many of the Biden administration’s student loan relief efforts are threatened, and some will likely be extinguished altogether.

Easy targets would include the SAVE plan, new regulations governing the Borrower Defense to Repayment program and President Biden’s “Plan B” debt relief initiative that could have benefited up to 30 million borrowers. 

All of these programs are currently tied up in court battles and subject to injunctions, which prevents the Education Department from implementing them. An easy way for the Trump administration to dispose of these programs would be to simply stop defending them, let the courts strike them down and decline to appeal those rulings. Alternatively, the administration could initiate a formal regulatory repeal process. 

Separately, the Trump administration will also probably kill President Biden’s proposed new hardship-based student loan forgiveness initiative, which has not yet been finalized.

However, despite the legal setbacks associated with these programs, the Biden administration has seen very real success elsewhere with its loan forgiveness efforts. 

Many borrowers are concerned that the Trump administration could try to reverse loan forgiveness that has already been awarded and approved, on top of trying to block key Biden initiatives. While anything is possible in theory, clawing back loan forgiveness that has already gone through is a much different ballgame than halting a program going forward. 

Here’s what borrowers should know.

$175 Billion in student loan forgiveness approved by Biden administration

According to data released by the Education Department this fall, the Biden administration has approved $175 billion in student loan forgiveness for 4.8 million borrowers over the last four years. The administration accomplished this via a variety of strategies, including regulatory updates, temporary waivers that relaxed program requirements and streamlining certain loan forgiveness and discharge programs to ease the pathway to approval. 

As a result of these actions, the administration is claiming success across several programs:

• $74 billion in student loan forgiveness for more than 1 million borrowers approved due to improvements made to Public Service Loan Forgiveness (PSLF).
• $56.5 billion in loan forgiveness granted for more than 1.4 million borrowers through Income-Driven Repayment (IDR) plans, including the ongoing IDR Account Adjustment initiative.
• $28.7 billion in discharges for more than 1.6 million borrowers who were harmed by their school due to a campus closure or misrepresentations. 
• $16.2 billion in discharges for almost 572,000 borrowers under the Total and Permanent Disability (TPD) discharge program.

No historic precedent for student loan forgiveness reversals

It’s important first to note that there is no historical precedent for reversing student loan forgiveness that had been properly approved under existing programs. From a practical standpoint, doing so could be logistically challenging for the Education Department, particularly if Congress cuts funding or staffing to the Office of Federal Student Aid. The administration would almost certainly face legal challenges if it tried to undo loan forgiveness that had already been granted.

There is some precedent for loan forgiveness that was awarded erroneously to be reversed. Earlier this year, hundreds of borrowers who had been improperly approved for loan forgiveness through the PSLF program had their balances reinstated months later when the Education Department was notified of a servicer error that had given borrowers PSLF credit for periods that shouldn’t have counted, even under the Biden administration’s waiver initiatives. But that limited and narrow example is very different from deliberately reversing previously-approved loan forgiveness on a mass scale as a matter of policy.

Case law cuts against reversing student loan forgiveness

Even while Republican state officials and conservative-leaning courts have taken a dim view of the Biden administration’s student loan forgiveness initiatives, recent court filings and rulings have suggested that reversing loan forgiveness already granted may be impractical and not allowable under law.

“One cannot unscramble this egg; loan forgiveness has an ‘irreversible impact,’” wrote Republican-led states in a legal challenge over President Biden’s SAVE plan in their legal brief calling for an injunction to block further relief under the program. The challengers’ concession that loan forgiveness already approved cannot be undone is notable.

In a companion case also challenging the SAVE plan, a different court noted, “Plaintiffs conceded at oral argument that they are seeking prospective relief and therefore are not requesting that the Court turn back the clock to reverse any loan forgiveness that has already occurred.”

When one of the SAVE plan legal challenges reached the 8th Circuit Court of Appeals, that court reaffirmed that loan forgiveness already approved under the SAVE plan would not be reversed. 

“Borrowers currently impacted by our administrative stay are in administrative forbearance and thus not required to pay principal or interest on their loans, borrowers who have remained in PAYE and REPAYE plans are not impacted, and the States [that are challenging the SAVE plan] cannot turn back the clock on any loans that have already been forgiven,” wrote the court.

Contractual and policy arguments against reversing student loan forgiveness

There may be other reasons why reversing student loan forgiveness could also be problematic for the Trump administration.

Federal student loans are governed by a Master Promissory Note, which contains numerous terms and conditions. Many statutory loan forgiveness programs, including IDR plans, TPD Discharges and PSLF, are included in the promissory notes. Reversing loan forgiveness granted to borrowers who fulfilled their contractual obligations could give rise to breach of contract claims. 

Borrowers could have other legal claims associated with loan forgiveness reversals, as well, including “detrimental reliance” — the concept that a person relied on a promise or assurance to their detriment. 

In this example, a borrower who had their loans forgiven and then made financial decisions based on the assurance that they had no further obligation (such as taking on additional expenses, buying a home or purchasing a new car based on no longer having any student loan payments), could have a detrimental reliance claim if that loan forgiveness was subsequently reversed. 

The Trump administration or Congress could take steps to halt or end student loan forgiveness programs, but historically, this has only applied to new borrowers or new student loans issued after a certain date, effectively grandfathering in current borrowers. For example, during the first Trump administration, officials proposed ending the PSLF program. But that only would have applied to new borrowers; current borrowers would have been able to continue to access that PSLF program, and previously approved student loan forgiveness would not have been clawed back. 

At least one student loan legal expert told The New York Times that there is a “presumption against retroactivity that would force Congress to pass a law specifically designed to reinstate debts — separate and apart from any successful bid to” reverse or end existing loan forgiveness programs, such as PSLF.

Could student loan forgiveness be rolled back?

In this volatile and uncertain time, anything is possible, and nothing is necessarily guaranteed. Student loan borrowers are experiencing unprecedented upheaval and turmoil, and it is understandable that many are concerned about the future.

However, there may be very real barriers if the Trump administration wants to try to claw back student loan forgiveness that was approved during the last several years. To be clear, that doesn’t mean the administration wouldn’t try it; but doing so would be logistically challenging for the Education Department, and would almost certainly lead to significant legal challenges. 

It is probably more likely that the administration will focus its efforts on areas where it can be more successful, such as blocking and reversing some of the newer Biden administration attempts at mass debt relief, and possibly trying to enact new regulations or legislation that restricts student loan forgiveness going forward.