[Editor's Note: The public comment period ended February 10, 2023.]
The US Department of Education is accepting public comments as a Request for Information (RFI) about "Public Transparency for Low-Financial-Value Postsecondary Programs." The announcement is available at the US Federal Register.
As with most US government rules and policies, industry insiders have great influence in these decisions--and concerned citizens are often shut out of the process. When consumers do have a chance to speak, they may not even know of those opportunities. That's why the Higher Education Inquirer is asking student loan debtors to contribute to this RFI while they can.
Tell DC policymakers and technocrats about your unique struggles (and your family's struggles) tied to student debt--and what could be done to better inform consumers like you.
There you can find public comments that have already been made. As of February 15, only 129 comments were posted.
According to the announcement:
"a misalignment of prices charged to financial benefits received may cause particularly acute harm for student loan borrowers who may struggle to repay their debts after discovering too late that their postsecondary programs did not adequately prepare them for the workforce. Taxpayers also shoulder the costs when a substantial number and share of borrowers are unable to successfully repay their loans. The number of borrowers facing challenges related to the repayment of their student loans is significant."
The Request for Information continues...
"Programs that result in students taking on excessive amounts of debt can make it challenging for students to reach significant life milestones like purchasing a home, starting a family, or saving enough for retirement, ultimately undermining their ability to climb the economic mobility ladder. Especially for borrowers who attended graduate programs, debt-to-income ratios often rise well above sustainable levels. IDR (Income-Driven Repayment) plans also cannot fully protect borrowers from the consequences of low financial-value programs. For instance, IDR plans cannot give students back the time they invested in such programs. For many programs, the cost of students' time may be at least as significant as direct program costs such as tuition, fees, and supplies. Loans will also still show up on borrowers' credit reports, including any periods of delinquency or default prior to enrollment in IDR."
"The Biden-Harris Administration is committed to improving accountability for institutions of higher education. One component of that work is to increase transparency and public accountability by drawing attention to the postsecondary programs that are most likely to leave students with unaffordable loans and provide the lowest financial returns for students and taxpayers."
CECU, an group representing for-profit colleges, has an organized effort to protect its interests.
Meanwhile, Robert Kelchen has provided an EXCEL spreadsheet that provides many answers. The dataset covers 45,971 programs at 5,033 institutions with data on both student debt and earnings for those same cohorts. We found more than 12,200 programs where debt exceeds income. And more than 7200 programs resulted in median incomes of less than $25,000 a year with debt greater than $10,000.
While some of these high-debt programs in medicine and law may eventually be profitable, many more paint a picture of struggle with a lifetime of debt peonage. Cosmetology schools had a large number of low-income programs. But the fine arts, humanities, social sciences, and education also produced low-value programs in terms of debt to income ratio.
Some of subprime schools HEI has been investigating (Purdue University Global, University of Arizona Global, The Art Institutes) had a number of low-value majors. But elite and brand name schools like Duke, Drexel, Emory, Syracuse, Baylor, DePaul, New School, and University of Rochester even have high debt and low-income programs.
The Congressional Budget Office (CBO) has dramatically revised its projections for the federal student loan program, transforming what was once expected to be a profitable government investment into a significant fiscal liability. This report examines the details of these projection changes and analyzes the operational costs of the Federal Student Aid (FSA) program.
The CBO's updated budget projections released in 2024 reveal a stark shift in the expected financial performance of the federal student loan program. These projections represent a significant revision from earlier expectations and highlight growing concerns about the sustainability of current student lending policies.
According to the Committee for a Responsible Federal Budget (CRFB), the estimated federal cost of student loans issued between 2015 and 2024 has increased by $340 billion – transforming from a projected gain of $135 billion in the 2014 baseline to an expected loss of $205 billion in the 2024 baseline15. This represents a complete reversal in the financial outlook for the program over the past decade.
This dramatic shift is particularly evident when examining the changing projections for specific loan cohorts. In 2014, the CBO projected that taxpayers would generate an 11-cent profit for every dollar of student loans issued by the federal government in fiscal year 2024. However, the most recent projections indicate that taxpayers will instead incur a 20-cent loss per dollar of loans issued this fiscal year6.
Looking ahead, the situation appears even more concerning. Over the 2024-2034 budget window, the CBO expects federal student loans to cost taxpayers $393 billion1. This amount exceeds the $355 billion CBO expects to be spent on Pell Grants, the flagship college aid program for low-income students, over the same time period1.
The projected $393 billion cost includes several components:
$221 billion in losses on the $1.1 trillion in student loans the federal government will issue during this period
$140 billion in re-estimates of the losses taxpayers will bear on outstanding loans
$34 billion toward administering the student loan programs6
One particularly concerning aspect of the CBO projections is the growing cost of graduate student loans. These loans are expected to make up around half of new student loans originated in the current fiscal year11. The CBO projects that taxpayers will lose $102 billion on lending to graduate students over the coming decade11. According to the CRFB, graduate school loans are now nearly as subsidized as undergraduate loans and make up half of the cost of newly issued student loans15.
The dramatic increase in projected costs has several primary causes, as identified in the CBO reports and analyses by financial experts.
The primary catalyst for the growing losses is the expansion and increased utilization of income-driven repayment (IDR) plans6. While a borrower repaying loans under a traditional fixed-term repayment plan typically repays more than the initial amount borrowed, a typical borrower using an IDR plan will repay significantly less than the original loan amount6.
The CBO projects that taxpayers will lose between 30 and 48 cents for every dollar in federal student loans issued in fiscal year 2024 and repaid on an IDR plan1. Preston Cooper notes in his LinkedIn post that "the role of IDR plans in driving these costs can't be overstated. CBO generally expects taxpayers to profit on loans repaid through traditional fixed-term repayment plans. But loans repaid on IDR plans will incur losses ranging from 30 to 48 cents on the dollar"1.
The Biden administration's student loan forgiveness initiatives are cited as significant contributors to the growing cost of the program. The House Budget Committee press release states that "$140 billion or over a third of this cost directly stems from President Biden's student loan forgiveness schemes"7. These initiatives include changes to income-driven repayment plans to make them more generous1.
Beyond the projected losses on the loans themselves, the Federal Student Aid (FSA) program incurs significant operational costs to administer federal student aid programs.
According to FSA's 2024 annual report, the agency operated on an annual administrative budget of approximately $2.1 billion during FY 20244. As of September 30, 2024, FSA was staffed by 1,444 full-time employees who are primarily based in FSA's headquarters in Washington, DC, with additional staff in 10 regional offices throughout the country4.
The Department of Education's Salaries and Expenses Overview provides additional insight into how these administrative funds are allocated. The Student Aid Administration account consists of two primary components:
Salaries and Expenses
Servicing Activities
In the fiscal year 2020 budget request, for example, the Student Aid Administration account totaled $1,812,000,000, with $1,281,281,000 allocated for Salaries and Expenses and $530,719,000 for Servicing Activities5.
The latest CBO projections highlight a dramatic shift in the financial outlook for the federal student loan program. What was once projected to be a profitable government investment has transformed into a significant fiscal liability, with taxpayers expected to lose hundreds of billions of dollars over the next decade.
This transformation raises important questions about the sustainability of current policies and the potential need for reforms to address growing costs. The substantial operational budget of FSA ($2.1 billion annually) adds to the overall fiscal impact of federal student aid programs.
As policymakers consider the future of federal student aid, they will need to grapple with balancing access to higher education with fiscal responsibility and ensuring that federal resources are allocated efficiently and effectively.
What happens now with the US Department of Education now that Elon Musk claims that it no longer exists? It's hard to know yet, and even more difficult after removing career government workers that we have known for years.
We are saddened to hear of contacts we know who have been fired: hard working and capable people, in an agency that has been chronically understaffed and politicized.
We also worry for the hundreds of thousands of student loan debtors who have borrower defense to repayment claims against schools that systematically defrauded them--and have not yet received justice.
And what about all those FAFSA (financial aid) forms for students starting and continuing their schooling? How will they be processed in a timely manner?
The College Meltdown continues in 2020. This phenomenon is deeper than the coronavirus, the temporary closing of campuses across the US, and the cancellation of NCAA basketball's March Madness. What we are seeing in the news should be a smaller entry in the History of American Higher Education compared to larger trends and social problems that preceded the pandemic.
College and university enrollment has been declining slowly but constantly since 2011, with for-profit colleges and community colleges taking the largest hits. And it follows larger demographic trends which include a half century of increasing inequality, including "savage inequalities" in the K-12 pipeline, crushing student loan debt, decreasing social mobility and the underemployment of college graduates, smaller families, and the hollowing out of America.
There are many parts to the current Coronavirus crisis and its effects on US higher education. But they all boil down to the Trump mantra (defund, deregulate, and privatize) and the opportunity for the elites to capitalize from the crisis, as they did during and after the Great Recession.
[Image below from Wikipedia. Higher education in the US has increasingly relied on for-profit mechanisms for growth and revenues. This includes privatized housing and services and for-profit Online Program Managers (OPMs).]
Higher education is a small but significant part of the US economy, which includes much larger sectors like Health Care and Finance. While the working class will not get bailed out, these sectors likely will, with the sudden crisis used as a rationalization. The crisis of crushing student loan debt and the much larger problems related to 50 years of growing inequality may be more disruptive in the long run, but these matters continue to be ignored.
Whether the next President is Donald Trump or Joe Biden, things could get worse for working families, unless there is mass resistance--right now I don't see that happening. For the moment, many young people are responding by living with family, not going to college, and delaying child bearing. Those who do get an education are also making economic sacrifices. Some, for example are selling their bodies as Sugar Babies to get through school.
Many state economies also look bleak in the near future. Not enough in revenues and increasing Medicaid costs make investments in education difficult to do without increasing taxes or state-level debt. And it's not likely that the wealthy will be willing to pay their fair share, unless they feel economically threatened. If that happens, rich companies and rich people can just move out of state or out of the country.
Higher Education and the Student Loan Mess
In October 2019, Trump Department of Education official Wayne Johnson resigned, recognizing that student loan debt mess was worse than anyone had imagined. US higher education enrollment is supposed to be countercyclical (improving when the economy drops) , but don't bet on it without government help.
Haven't heard any rumors in months, but it should also be interesting to see if President Trump tries to unload the $1.5T in federal loans to his banking friends using an executive order. McKinsey & Company have been tasked to determine the possibilities of such a maneuver, but there is radio silence on that front.
In the education sector, I'm watching student loan servicers and private lenders Sallie Mae (SLM), Navient (NAVI), and Nelnet (NNI) closely. Student Loan Asset-Backed Securities (also known as SLABS) are also worthy of scrutiny given the low rates of student loan repayment.
History can be many things. It can be both informative and purposely deceptive. And from time to time, historical events need to be revisited if we seek the truth. We also find critical historical analysis essential when we think about US higher education and student loan debt from a People's perspective.
From 1965 to 2010, the federal government was a backstop for private student loans, Guaranteed Student Loans, also known as the FFEL loans. Annual volume of private loans skyrocketed, from $5B in 2001 to over $20B in 2008, when 14 percent of all undergraduates had one. A secondary market for private student loan debt (student loan asset-backed securities) also began to flourish. An industry group, America's Student Loan Providers (ASLP), provided political cover for private lenders.
In 2007, President George W. Bush signed the College Cost Reduction and Access Act of 2007 (HR 2669) which cut subsidies to lenders and increasing grants to students. But this did little to contain the growing mountain of student loan debt. A mountain of unrecoverable debt that was crushing millions of consumers as the US was facing an enormous economic crisis, the Great Recession.
In rereading The Student Loan Mess, we also discovered that these private entities had not only made questionable loans, some private lenders had also bribed university officials to become preferred lenders. How commonplace this student loan grift was has not been adequately explored.
As part of Health Care and Education Reconciliation Act of 2010, President Obama's takeover of the Guaranteed Student Loan program in 2010, did get attention. Ending the Guaranteed Student Loan program was supposed to save the US government $66B over an 11-year period. This rosy projection never materialized. The FFEL loans acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program are now part of the Direct Loan portfolio. The U.S. Department of Education (ED) acquired an additional $20.4 billion in face amount of FFEL loans from lenders during the transition from the FFEL program to the Direct Loan program.
The FFEL loans that were not acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program remained with the original private lenders. These loans continue to be serviced by the private lenders that issued them.
For-profit colleges, the engine for much of this bad debt, did get scrutiny, and from 2010 to 2023, their presence was reduced. But overpriced education and edugrift continued in many forms. And after a short respite from 2020 to 2024, the mountain of bad student loan debt continues to grow.
In the increasingly commodified world of higher education, the University of Phoenix and Risepoint (formerly Academic Partnerships) represent parallel tales of how private equity, political influence, and deceptive practices have shaped the online college landscape. While their paths have diverged in branding and institutional affiliation, the underlying motives and outcomes share disturbing similarities.
The University of Phoenix: A Legacy of Legal and Ethical Trouble
The University of Phoenix (UOP) has been a central player in the for-profit college boom, particularly during and after the 2000s. Under the ownership of Apollo Education Group, and later the Vistria Group, UOP has faced a relentless stream of lawsuits, regulatory scrutiny, and public outrage.
In 2019, the Federal Trade Commission (FTC) reached a $191 million settlement with UOP over allegations of deceptive advertising. UOP falsely claimed partnerships with major corporations like Microsoft, AT&T, and Twitter to entice students. The result was $50 million in restitution and $141 million in student debt relief.
But the legal troubles didn’t stop there. In 2022 and 2023, the U.S. Department of Education included UOP in a broader class action that granted $37 million in borrower defense discharges. These claims stemmed from deceptive marketing and predatory recruitment practices.
Meanwhile, in 2024, the California Attorney General settled with UOP for $4.5 million over allegations of illegally targeting military service members between 2012 and 2015. The university’s controversial relationship with the military community also led to a temporary VA suspension of GI Bill enrollments in 2020.
The legal history includes False Claims Act suits brought by whistleblowers, including former employees alleging falsified records, incentive-based recruiter pay, and exaggerated graduation and job placement statistics. In 2019, Apollo Education settled a securities fraud lawsuit for $7.4 million.
More recently, UOP has been embroiled in political controversy in Idaho. In 2023 and 2024, the Idaho Attorney General challenged the state's attempt to acquire UOP, citing Open Meetings Act violations and lack of transparency. Though a federal judge initially dismissed the suit, Idaho’s Supreme Court allowed an appeal to proceed.
Through all of this, Vistria Group—UOP’s private equity owner since 2017—has reaped massive profits. Vistria was co-founded by Marty Nesbitt, a close confidant of Barack Obama, underscoring the bipartisan political protection that shields for-profit education from lasting accountability.
Risepoint and the Online Program Management Model
Risepoint, formerly Academic Partnerships (AP), tells a similarly troubling story, albeit from the Online Program Manager (OPM) side of the education-industrial complex. Founded in 2007 by Randy Best, a well-connected Republican donor with ties to Jeb Bush, AP helped universities build online degree programs in exchange for a significant cut of tuition—sometimes up to 50%.
This tuition-share model, though legal, has raised ethical red flags. Critics argue it diverts millions in public education dollars into private hands, inflates student debt, and incentivizes aggressive, misleading recruitment. The most infamous case was the University of Texas-Arlington, which paid AP more than $178 million over five years. President Vistasp Karbhari resigned in 2020 after it was revealed he had taken international trips funded by AP.
Risepoint was acquired by Vistria Group in 2019, placing it in the same portfolio as the University of Phoenix and other education businesses. The firm’s growing influence in higher education—fueled by Democratic-aligned private equity—reflects a deeper entanglement of politics, policy, and profiteering.
In 2024, Minnesota became the first state to ban new tuition-share agreements with OPMs like Risepoint. This legislative action followed backlash from a controversial deal between Risepoint and St. Cloud State University, where critics accused the firm of extracting excessive revenue while offering questionable value.
Further pressure came from the federal level. In 2024, Senators Elizabeth Warren, Sherrod Brown, and Tina Smith issued letters to major OPMs demanding transparency about recruitment tactics and tuition-share models. The Department of Education followed in January 2025 with new guidance restricting misleading marketing by OPMs, including impersonation of university staff.
Despite this, Risepoint continued expanding. In late 2023, the company purchased Wiley’s online program business for $150 million, signaling consolidation in a turbulent industry. Yet a 2024 report showed 147 OPM-university contracts had been terminated in 2023, and new contracts fell by over 50%.
What Ties Them Together: Vistria Group
Vistria Group sits at the center of both sagas. The Chicago-based private equity firm has made education—especially online and for-profit education—a core pillar of its investment strategy. With connections to both Democratic and Republican power brokers, Vistria has deftly navigated the regulatory landscape while profiting from public education dollars.
Its ownership of the University of Phoenix and Risepoint demonstrates a clear strategy: acquire distressed or controversial education companies, clean up their public image, and extract revenue while avoiding deep reforms. Through Vistria, private equity gains access to billions in federal student aid with minimal oversight and a bipartisan shield.
The result is a higher education ecosystem where political influence, corporate profit, and public exploitation collide. And whether through online degrees from the University of Phoenix or public-private partnerships with Risepoint, students are often the ones left bearing the cost.
As scrutiny intensifies and state and federal lawmakers demand reform, the futures of Risepoint and the University of Phoenix remain uncertain. But one thing is clear: their shared story reveals how higher education has become a battleground of greed, power, and politics.
The federal government is a sh*t show right now. From ICE abductions of pro-Palestine college students to proposed cuts to Social Security and Medicaid, the Trump administration is wreaking havoc on all of our communities.
We want to take a moment and specifically talk about student debt and higher education — work that we’ve been doing for a while now. Here’s some of what we know, what we think, and what we should do:
In recent days, the Trump administration issued an executive order to dismantle the Department of Education. Legally, this cannot be done without Congress, but in practice, this means most of the staff was simply fired. We talked a little bit about what that means for student debtors in this Twitter thread. In short, this makes the student debt crisis much worse.
Shortly after that, Trump ordered the entire federal student debt portfolio — all $1.7 trillion — to be moved from the Department of Education to the Small Business Administration (SBA). The Small Business Administration is another agency within the federal government. That means our collective creditor would still be the federal government. But will this move actually happen? Will our federal student loans somehow end up privatized? There is a LOT up in the air right now, and the short answer is we don’t know exactly what will happen, but we as debtors should remain nimble so we can exercise our collective power when we need to. Moving our student debt from the Department of Education to the SBA would be 1) illegal 2) administratively and practically difficult 3) lead to possible errors with your account.
If you haven’t already, we still highly recommend going to studentaid.gov and finding your loan details and downloading and/or screenshotting your history.
The traditional infrastructure we have long suggested debtors utilize to solve problems with their student debt — the Consumer Financial Protection Bureau (CFPB), the FSA ombudsman team, etc — have either been undermined or outright destroyed. This means there are fewer and fewer ways for us, student debtors, to get answers to problems with our student debt accounts. But we shouldn’t let Congress off the hook — we should make student loans Congress’ problem. They’re elected to serve us and it’s their job to attend to your needs.
Lastly, we want to talk about what we mean when we say Free College. Student debt has ruined lives, and will continue to as long as it exists. We shouldn’t have to borrow to pay for college — in fact, we shouldn’t have to pay at all. It should be free. And that’s what we’re fighting for. But our vision for College For All doesn’t stop at tuition-free — it means ICE and cops off campus; it means paying workers, faculty and staff a living wage; it means standing up for free speech; it means ending domestic and gender based violence on campus; and it means universities that function as laboratories for democracy and learning, not as laboratories for landlords and imperialism.
On April 17th, Debt Collective is co-sponsoring the National Higher Education Day of Action to demand our vision of College For All and oppose the hell the Trump administration is causing right now. Find an event near you HERE to participate — or start an event on your own!
And THIS SATURDAY – April 5th –we’re taking to the streets with hundreds of thousands of people across the country to tell Trump and Musk “Hands Off Our Democracy!” They’re stripping America for parts, and it's up to us to put an end to their brazen power grab. This will be one of the largest mass mobilizations in recent history — and we need you in the streets with us. There are hundreds of actions planned, find one to join near you HERE.
Whatever happens in the future, we will be more likely to win if we gird ourselves with each other’s stories and experiences so we can fight together. This is why we built a debtors’ union — the only virtual factory floor for debtors. Debt acts as a discipline and keeps people from joining the struggle for things we care about — but we can increase our numbers and build power by canceling unjust debts. We all share the same creditor and we need to stay connected to one another. Forward this email to a friend or family member and tell them to join the union and our email list so we can stay connected.
When
borrowers default on their federal student loans, the U.S. Department
of Education (“Department of Education”) can collect the outstanding
balance through forced collections, including the offset of tax refunds
and Social Security benefits and the garnishment of wages. At the
beginning of the COVID-19 pandemic, the Department of Education paused
collections on defaulted federal student loans.1
This year, collections are set to resume and almost 6 million student
loan borrowers with loans in default will again be subject to the
Department of Education’s forced collection of their tax refunds, wages,
and Social Security benefits.2
Among the borrowers who are likely to experience forced collections are
an estimated 452,000 borrowers ages 62 and older with defaulted loans
who are likely receiving Social Security benefits.3
This
spotlight describes the circumstances and experiences of student loan
borrowers affected by the forced collection of Social Security benefits.4
It also describes how forced collections can push older borrowers into
poverty, undermining the purpose of the Social Security program.5
Key findings
The
number of Social Security beneficiaries experiencing forced collection
grew by more than 3,000 percent in fewer than 20 years; the count is
likely to grow as the age of student loan borrowers trends older.
Between 2001 and 2019, the number of Social Security beneficiaries
experiencing reduced benefits due to forced collection increased from
approximately 6,200 to 192,300. This exponential growth is likely driven
by older borrowers who make up an increasingly large share of the
federal student loan portfolio. The number of student loan borrowers
ages 62 and older increased by 59 percent from 1.7 million in 2017 to
2.7 million in 2023, compared to a 1 percent decline among borrowers
under the age of 62.
The total amount
of Social Security benefits the Department of Education collected
between 2001 and 2019 through the offset program increased from $16.2
million to $429.7 million. Despite the exponential increase in
collections from Social Security, the majority of money the Department
of Education has collected has been applied to interest and fees and has
not affected borrowers’ principal amount owed. Furthermore, between
2016 and 2019, the Department of the Treasury’s fees alone accounted for
nearly 10 percent of the average borrower’s lost Social Security
benefits.
More than one in three
Social Security recipients with student loans are reliant on Social
Security payments, meaning forced collections could significantly
imperil their financial well-being. Approximately 37 percent of the
1.3 million Social Security beneficiaries with student loans rely on
modest payments, an average monthly benefit of $1,523, for 90 percent of
their income. This population is particularly vulnerable to reduction
in their benefits especially if benefits are offset year-round. In 2019,
the average annual amount collected from individual beneficiaries was
$2,232 ($186 per month).
The physical well-being of half of Social Security beneficiaries with student loans in default may be at risk.
Half of Social Security beneficiaries with student loans in default and
collections skipped a doctor’s visit or did not obtain prescription
medication due to cost.
Existing minimum income protections fail to protect student loan borrowers with Social Security against financial hardship.
Currently, only $750 per month of Social Security income—an amount that
is $400 below the monthly poverty threshold for an individual and has
not been adjusted for inflation since 1996—is protected from forced
collections by statute. Even if the minimum protected income was
adjusted for inflation, beneficiaries would likely still experience
hardship, such as food insecurity and problems paying utility bills. A
higher threshold could protect borrowers against hardship more
effectively. The CFPB found that for 87 percent of student loan
borrowers who receive Social Security, their benefit amount is below 225
percent of the federal poverty level (FPL), an income level at which
people are as likely to experience material hardship as those with
incomes below the federal poverty level.
Large
shares of Social Security beneficiaries affected by forced collections
may be eligible for relief or outright loan cancellation, yet they are
unable to access these benefits, possibly due to insufficient
automation or borrowers’ cognitive and physical decline. As many as
eight in ten Social Security beneficiaries with loans in default may be
eligible to suspend or reduce forced collections due to financial
hardship. Moreover, one in five Social Security beneficiaries may be
eligible for discharge of their loans due to a disability. Yet these
individuals are not accessing such relief because the Department of
Education’s data matching process insufficiently identifies those who
may be eligible.
Taken together,
these findings suggest that the Department of Education’s forced
collections of Social Security benefits increasingly interfere with
Social Security’s longstanding purpose of protecting its beneficiaries
from poverty and financial instability.
Introduction
When
borrowers default on their federal student loans, the Department of
Education can collect the outstanding balance through forced
collections, including the offset of tax refunds and Social Security
benefits, and the garnishment of wages. At the beginning of the COVID-19
pandemic, the Department of Education paused collections on defaulted
federal student loans. This year, collections are set to resume and
almost 6 million student loan borrowers with loans in default will again
be subject to the Department of Education’s forced collection of their
tax refunds, wages, and Social Security benefits.6
Among
the borrowers who are likely to experience the Department of
Education’s renewed forced collections are an estimated 452,000
borrowers with defaulted loans who are ages 62 and older and who are
likely receiving Social Security benefits.7
Congress created the Social Security program in 1935 to provide a basic
level of income that protects insured workers and their families from
poverty due to situations including old age, widowhood, or disability.8
The Social Security Administration calls the program “one of the most
successful anti-poverty programs in our nation's history.”9
In 2022, Social Security lifted over 29 million Americans from poverty,
including retirees, disabled adults, and their spouses and dependents.10
Congress has recognized the importance of securing the value of Social
Security benefits and on several occasions has intervened to protect
them.11
This
spotlight describes the circumstances and experiences of student loan
borrowers affected by the forced collection of their Social Security
benefits.12
It also describes how the purpose of Social Security is being
increasingly undermined by the limited and deficient options the
Department of Education has to protect Social Security beneficiaries
from poverty and hardship.
The forced collection of Social Security benefits has increased exponentially.
Federal
student loans enter default after 270 days of missed payments and
transfer to the Department of Education’s default collections program
after 360 days. Borrowers with a loan in default face several
consequences: (1) their credit is negatively affected; (2) they lose
eligibility to receive federal student aid while their loans are in
default; (3) they are unable to change repayment plans and request
deferment and forbearance;13 and (4) they face forced collections of tax refunds, Social Security benefits, and wages among other payments.14
To conduct its forced collections of federal payments like tax refunds
and Social Security benefits, the Department of Education relies on a
collection service run by the U.S. Department of the Treasury called the
Treasury Offset Program.15
Between
2001 and 2019, the number of student loan borrowers facing forced
collection of their Social Security benefits increased from at least
6,200 to 192,300.16
That is a more than 3,000 percent increase in fewer than 20 years. By
comparison, the number of borrowers facing forced collections of their
tax refunds increased by about 90 percent from 1.17 million to 2.22
million during the same period.17
This exponential growth of Social Security offsets between 2001 and 2019 is likely driven by multiple factors including:
Older
borrowers accounted for an increasingly large share of the federal
student loan portfolio due to increasing average age of enrollment and
length of time in repayment. Data from the Department of Education
(which is only available since 2017), show that the number of student
loan borrowers ages 62 and older, increased 24 percent from 1.7 million
in 2017 to 2.1 million in 2019, compared to less than 1 percent among
borrowers under the age of 62.18
A larger number of borrowers, especially older borrowers, had loans in default.
Data from the Department of Education show that the number of student
loan borrowers with a defaulted loan increased by 230 percent from 3.8
million in 2006 to 8.8 million in 2019.19 Compounding these trends is the fact that older borrowers are twice as likely to have a loan in default than younger borrowers.20
Due
to these factors, the total amount of Social Security benefits the
Department of Education collected between 2001 and 2019 through the
offset program increased annually from $16.2 million to $429.7 million
(when adjusted for inflation).21
This increase occurred even though the average monthly amount the
Department of Education collected from individual beneficiaries was the
same for most years, at approximately $180 per month.22
Figure 1: Number of Social Security beneficiaries and total amount collected for student loans (2001-2019)
Source: CFPB analysis of public data from U.S. Treasury’s Fiscal Data portal. Amounts are presented in 2024 dollars.
While the total collected from
Social Security benefits has increased exponentially, the majority of
money the Department of Education collected has not been applied to
borrowers’ principal amount owed. Specifically, nearly three-quarters of
the monies the Department of Education collects through offsets is
applied to interest and fees, and not towards paying down principal
balances.23
Between 2016 and 2019, the U.S. Department of the Treasury charged the
Department of Education between $13.12 and $15.00 per Social Security
offset, or approximately between $157.44 and $180 for 12 months of
Social Security offsets per beneficiary with defaulted federal student
loans.24 As a matter of practice, the Department of Education often passes these fees on directly to borrowers.25
Furthermore, these fees accounted for nearly 10 percent of the average
monthly borrower’s lost Social Security benefits which was $183 during
this time.26
Interest and fees not only reduce beneficiaries’ monthly benefits, but
also prolong the period that beneficiaries are likely subject to forced
collections.
Forced collections are compromising Social Security beneficiaries’ financial well-being.
Forced
collection of Social Security benefits affects the financial well-being
of the most vulnerable borrowers and can exacerbate any financial and
health challenges they may already be experiencing. The CFPB’s analysis
of the Survey of Income and Program Participation (SIPP) pooled data for
2018 to 2021 finds that Social Security beneficiaries with student
loans receive an average monthly benefit of $1,524.27
The analysis also indicates that approximately 480,000 (37 percent) of
the 1.3 million beneficiaries with student loans rely on these modest
payments for 90 percent or more of their income,28
thereby making them particularly vulnerable to reduction in their
benefits especially if benefits are offset year-round. In 2019, the
average annual amount collected from individual beneficiaries was $2,232
($186 per month).29
A
recent survey from The Pew Charitable Trusts found that more than nine
in ten borrowers who reported experiencing wage garnishment or Social
Security payment offsets said that these penalties caused them financial
hardship.30
Consequently, for many, their ability to meet their basic needs,
including access to healthcare, became more difficult. According to our
analysis of the Federal Reserve’s Survey of Household Economic and
Decision-making (SHED), half of Social Security beneficiaries with
defaulted student loans skipped a doctor’s visit and/or did not obtain
prescription medication due to cost.31
Moreover, 36 percent of Social Security beneficiaries with loans in
delinquency or in collections report fair or poor health. Over half of
them have medical debt.32
Figure 2: Selected financial experiences and hardships among subgroups of loan borrowers
Source: CFPB analysis of the Federal Reserve Board Survey of Household Economic and Decision-making (2019-2023).
Social Security recipients
subject to forced collection may not be able to access key public
benefits that could help them mitigate the loss of income. This is
because Social Security beneficiaries must list the unreduced amount of
their benefits prior to collections when applying for other means-tested
benefits programs such as Social Security Insurance (SSI), Supplemental
Nutrition Assistance Program (SNAP), and the Medicare Savings Programs.33
Consequently, beneficiaries subject to forced collections must report
an inflated income relative to what they are actually receiving. As a
result, these beneficiaries may be denied public benefits that provide
food, medical care, prescription drugs, and assistance with paying for
other daily living costs.34
Consumers’
complaints submitted to the CFPB describe the hardship caused by forced
collections on borrowers reliant on Social Security benefits to pay for
essential expenses.35
Consumers often explain their difficulty paying for such expenses as
rent and medical bills. In one complaint, a consumer noted that they
were having difficulty paying their rent since their Social Security
benefit usually went to paying that expense.36
In another complaint, a caregiver described that the money was being
withheld from their mother’s Social Security, which was the only source
of income used to pay for their mother’s care at an assisted living
facility.37
As forced collections threaten the housing security and health of
Social Security beneficiaries, they also create a financial burden on
non-borrowers who help address these hardships, including family members
and caregivers.
Existing minimum income protections fail to protect student loan borrowers with Social Security against financial hardship.
The
Debt Collection Improvement Act set a minimum floor of income below
which the federal government cannot offset Social Security benefits and
subsequent Treasury regulations established a cap on the percentage of
income above that floor.38
Specifically, these statutory guardrails limit collections to 15
percent of Social Security benefits above $750. The minimum threshold
was established in 1996 and has not been updated since. As a result, the
amount protected by law alone does not adequately protect beneficiaries
from financial hardship and in fact no longer protects them from
falling below the federal poverty level (FPL). In 1996, $750 was nearly
$100 above the monthly poverty threshold for an individual.39
Today that same protection is $400 below the threshold. If the
protected amount of $750 per month ($9,000 per year) set in 1996 was
adjusted for inflation, in 2024 dollars, it would total $1,450 per month
($17,400 per year).40
Figure
3: Comparison of monthly FPL threshold with the current protected
amount established in 1996 and the amount that would be protected with
inflation adjustment
Source: Calculations by the CFPB. Notes: Inflation adjustments based on the consumer price index (CPI).
Even if the minimum protected
income of $750 is adjusted for inflation, beneficiaries will likely
still experience hardship as a result of their reduced benefits.
Consumers with incomes above the poverty line also commonly experience
material hardship.41 This suggests that a threshold that is higher than the poverty level will more effectively protect against hardship.42
Indeed, in determining an income threshold for $0 payments under the
SAVE plan, the Department of Education researchers used material
hardship (defined as being unable to pay utility bills and reporting
food insecurity) as their primary metric, and found similar levels of
material hardship among those with incomes below the poverty line and
those with incomes up to 225 percent of the FPL.43
Similarly, the CFPB’s analysis of a pooled sample of SIPP respondents
finds the same levels of material hardship for Social Security
beneficiaries with student loans with incomes below 100 percent of the
FPL and those with incomes up to 225 percent of the FPL.44
The CFPB found that for 87 percent of student loan borrowers who
receive Social Security, their benefit amount is below 225 percent of
the FPL.45
Accordingly, all of those borrowers would be removed from forced
collections if the Department of Education applied the same income
metrics it established under the SAVE program to an automatic hardship
exemption program.
Existing options for relief from forced collections fail to reach older borrowers.
Borrowers
with loans in default remain eligible for certain types of loan
cancellation and relief from forced collections. However, our analysis
suggests that these programs may not be reaching many eligible
consumers. When borrowers do not benefit from these programs, their
hardship includes, but is not limited to, unnecessary losses to their
Social Security benefits and negative credit reporting.
Borrowers who become disabled after reaching full retirement age may miss out on Total and Permanent Disability
The
Total and Permanent Disability (TPD) discharge program cancels federal
student loans and effectively stops all forced collections for disabled
borrowers who meet certain requirements. After recent revisions to the
program, this form of cancelation has become common for those borrowers
with Social Security who became disabled prior to full retirement age.46 In 2016, a GAO study documented the significant barriers to TPD that Social Security beneficiaries faced.47
To address GAO’s concerns, the Department of Education in 2021 took a
series of mitigating actions, including entering into a data-matching
agreement with the Social Security Administration (SSA) to automate the
TPD eligibility determination and discharge process.48
This process was expanded further with new final rules being
implemented July 1, 2023 that expanded the categories of borrowers
eligible for automatic TPD cancellation.49 In total, these changes successfully resulted in loan cancelations for approximately 570,000 borrowers.50
However,
the automation and other regulatory changes did not significantly
change the application process for consumers who become disabled after
they reach full retirement age or who have already claimed the Social
Security retirement benefits. For these beneficiaries, because they are
already receiving retirement benefits, SSA does not need to determine
disability status. Likewise, SSA does not track disability status for
those individuals who become disabled after they start collecting their
Social Security retirement benefits.51
Consequently,
SSA does not transfer information on disability to the Department of
Education once the beneficiary begins collecting Social Security
retirement.52
These individuals therefore will not automatically get a TPD discharge
of their student loans, and they must be aware and physically and
mentally able to proactively apply for the discharge.53
The
CFPB’s analysis of the Census survey data suggests that the population
that is excluded from the TPD automation process could be substantial.
More than one in five (22 percent) Social Security beneficiaries with
student loans are receiving retirement benefits and report a disability
such as a limitation with vision, hearing, mobility, or cognition.54
People with dementia and other cognitive disabilities are among those
with the greatest risk of being excluded, since they are more likely to
be diagnosed after the age 70, which is the maximum age for claiming
retirement benefits.55
These
limitations may also help explain why older borrowers are less likely
to rehabilitate their defaulted student loans. Specifically, 11 percent
of student loan borrowers ages 50 to 59 facing forced collections
successfully rehabilitated their loans,56 while only five percent of borrowers over the age of 75 do so.57
Figure
4: Number of student loan borrowers ages 50 and older in forced
collection, borrowers who signed a rehabilitation agreement, and
borrowers who successfully rehabilitated a loan by selected age groups
Age Group
Number of Borrowers in Offset
Number of Borrowers Who Signed a Rehabilitation Agreement
Percent of Borrowers Who Signed a Rehabilitation Agreement
Number of Borrowers Successfully Rehabilitated
Percent of Borrowers who Successfully Rehabilitated
50 to 59
265,200
50,800
14%
38,400
11%
60 to 74
184,900
24,100
11%
18,500
8%
75 and older
15,800
1,000
6%
800
5%
Source: CFPB analysis of data provided by the Department of Education.
Shifting demographics of
student loan borrowers suggest that the current automation process may
become less effective to protect Social Security benefits from forced
collections as more and more older adults have student loan debt. The
fastest growing segment of student loan borrowers are adults ages 62 and
older. These individuals are generally eligible for retirement
benefits, not disability benefits, because they cannot receive both
classifications at the same time. Data from the Department of Education
reflect that the number of student loan borrowers ages 62 and older
increased by 59 percent from 1.7 million in 2017 to 2.7 million in 2023.
In comparison, the number of borrowers under the age of 62 remained
unchanged at 43 million in both years.58
Furthermore, additional data provided to the CFPB by the Department of
Education show that nearly 90,000 borrowers ages 81 and older hold an
average amount of $29,000 in federal student loan debt, a substantial
amount despite facing an estimated average life expectancy of less than
nine years.59
Existing exceptions to forced collections fail to protect many Social Security beneficiaries
In
addition to TPD discharge, the Department of Education offers reduction
or suspension of Social Security offset where borrowers demonstrate
financial hardship.60
To show hardship, borrowers must provide documentation of their income
and expenses, which the Department of Education then uses to make its
determination.61
Unlike the Debt Collection Improvement Act’s minimum protections, the
eligibility for hardship is based on a comparison of an individual’s
documented income and qualified expenses. If the borrower has eligible
monthly expenses that exceed or match their income, the Department of
Education then grants a financial hardship exemption.62
The
CFPB’s analysis suggests that the vast majority of Social Security
beneficiaries with student loans would qualify for a hardship
protection. According to CFPB’s analysis of the Federal Reserve Board’s
SHED, eight in ten (82 percent) of Social Security beneficiaries with
student loans in default report that their expenses equal or exceed
their income.63
Accordingly, these individuals would likely qualify for a full
suspension of forced collections. Yet the GAO found that in 2015 (when
the last data was available) less than ten percent of Social Security
beneficiaries with forced collections applied for a hardship exemption
or reduction of their offset.64
A possible reason for the low uptake rate is that many beneficiaries or
their caregivers never learn about the hardship exemption or the
possibility of a reduction in the offset amount.65
For those that do apply, only a fraction get relief. The GAO study
found that at the time of their initial offset, only about 20 percent of
Social Security beneficiaries ages 50 and older with forced collections
were approved for a financial hardship exemption or a reduction of the
offset amount if they applied.66
Conclusion
As
hundreds of thousands of student loan borrowers with loans in default
face the resumption of forced collection of their Social Security
benefits, this spotlight shows that the forced collection of Social
Security benefits causes significant hardship among affected borrowers.
The spotlight also shows that the basic income protections aimed at
preventing poverty and hardship among affected borrowers have become
increasingly ineffective over time. While the Department of Education
has made some improvements to expand access to relief options,
especially for those who initially receive Social Security due to a
disability, these improvements are insufficient to protect older adults
from the forced collection of their Social Security benefits.
Taken
together, these findings suggest that forced collections of Social
Security benefits increasingly interfere with Social Security’s
longstanding purpose of protecting its beneficiaries from poverty and
financial instability. These findings also suggest that alternative
approaches are needed to address the harm that forced collections cause
on beneficiaries and to compensate for the declining effectiveness of
existing remedies. One potential solution may be found in the Debt
Collection Improvement Act, which provides that when forced collections
“interfere substantially with or defeat the purposes of the payment
certifying agency’s program” the head of an agency may request from the
Secretary of the Treasury an exemption from forced collections.67
Given the data findings above, such a request for relief from the
Commissioner of the Social Security Administration on behalf of Social
Security beneficiaries who have defaulted student loans could be
justified. Unless the toll of forced collections on Social Security
beneficiaries is considered alongside the program’s stated goals, the
number of older adults facing these challenges is only set to grow.
Data and Methodology
To
develop this report, the CFPB relied primarily upon original analysis
of public-use data from the U.S. Census Bureau Survey of Income and
Program Participation (SIPP), the Federal Reserve Board Board’s Survey
of Household Economics and Decision-making (SHED), U.S. Department of
the Treasury, Fiscal Data portal, consumer complaints received by the
Bureau, and administrative data on borrowers in default provided by the
Department of Education. The report also leverages data and findings
from other reports, studies, and sources, and cites to these sources
accordingly. Readers should note that estimates drawn from survey data
are subject to measurement error resulting, among other things, from
reporting biases and question wording.
Survey of Income and Program Participation
The
Survey of Income and Program Participation (SIPP) is a nationally
representative survey of U.S. households conducted by the U.S. Census
Bureau. The SIPP collects data from about 20,000 households (40,000
people) per wave. The survey captures a wide range of characteristics
and information about these households and their members. The CFPB
relied on a pooled sample of responses from 2018, 2019, 2020, and 2021
waves for a total number of 17,607 responses from student loan borrowers
across all waves, including 920 respondents with student loans
receiving Social Security benefits. The CFPB’s analysis relied on the
public use data. To capture student loan debt, the survey asked to all
respondents (variable EOEDDEBT): Owed any money for student loans or
educational expenses in own name only during the reference period. To
capture receipt of Social Security benefits, the survey asked to all
respondents (variable ESSSANY): “Did ... receive Social Security
benefits for himself/herself at any time during the reference period?”
To capture amount of Social Security benefits, the survey asked to all
respondents (variable TSSSAMT): “How much did ... receive in Social
Security benefit payment in this month (1-12), prior to any deductions
for Medicare premiums?”
The
Federal Reserve Board’s Survey of Household Economics and
Decision-making (SHED) is an annual web-based survey of households. The
survey captures information about respondents’ financial situations. The
CFPB relied on a pooled sample of responses from 2019 through 2023
waves for a total number of 1,376 responses from student loan borrowers
in collection across all waves. The CFPB analysis relied on the public
use data. To capture default and collection, the survey asked all
respondents with student loans (variable SL6): “Are you behind on
payments or in collections for one or more of the student loans from
your own education?” To capture receipt of Social Security benefits, the
survey asked to all respondents (variable I0_c): “In the past 12
months, did you (and/or your spouse or partner) receive any income from
the following sources: Social Security (including old age and DI)?”
