The Federal Student Loan Program is Finished.

Alan Collinge
7 min readMay 26, 2022

It is beyond saving. It should not be saved.

Updated January, 2024.

Defenders of the federal student loan program are extremely worried. Every day in recent weeks a flurry of opinion pieces railing against student loan cancellation have overwhelmed the zeitgeist. A recent screenshot of Google News illustrates just how far the student loan swamp have pushed it past “11”:

While their most oft-repeated claims that student loan cancellation would benefit the wealthy and cause inflation are ridiculous and asinine, the increasing desperation- and sheer volume- of these articles betray a fact that everyone who knows- and especially those who defend- the federal loan program realize, but few possess the intellectual honesty to admit:

The federal student loan program is, by all rational metrics, finished. The pandemic was the nail in its coffin. There is no saving this lending system, and there is no good reason to save it.

Before the pandemic, the Brookings Institute estimated that student loan defaults for the Class of 2004 would reach 40%. This is double the default rate for subprime home mortgages. These borrowers, however, were borrowing less than a third (roughly $13,000) of what is borrowed today (roughly $39,000). Wages have not tripled since 2004. They have flat-lined with inflation, at best. Given this, it is not a stretch to say that defaults for all current student loan borrowers were going to be at least 60–70% (if not higher)…before the pandemic.

In 2019, Education Secretary Betsy DeVos acknowledged that 75% of all federal student loan borrowers were “unable to pay down their loans”. Wayne Johnson, the Federal Student Aid Director, said that this was closer to 80% in the first months of 2020, and more recently claimed that 85% of all borrowers were never going to be able to repay their student loan debt.

Department of Education data from before the pandemic shows that more than half of all borrowers (58.9% when including $0 payers in Income Driven Repayment plans) weren’t paying at all. As of January 2024, with federal student loan repayment resumed the total percentage of non-payers is nearly 80%, and that is likely to rise over time.

Student Loan Non-Payment Rate, January 2024

Despite popular misconceptions, this is now more a problem for older Americans than younger. Over half of all borrowers are now over 35 years old, not under 35, and people over 50 with student loans now outnumber people under 25. For both of the older groups, they owe far more than their younger counterparts, despite having borrowed far less many years or decades ago.

Source: U.S. Department of Education (Q4 2020)

Disturbingly, student loan debt in over a third of U.S. States now exceeds their state budgets. This is most prominent in historically red, conservative states. Georgia’s state budget is $48 Billion, for example. The people of Georgia, however, owe an astonishing $82 Billion in mostly federal student loan debt.

Analysis of the average student loan debt/borrower vs. average earnings for the various states yields a similar map. While student loan debt is not good in any of the states, southern, red states are being hit exceptionally hard.

A default rate 3–4 times higher than the subprime rate. Most borrowers not paying. 80% of all borrowers underwater. Older borrowers outnumbering younger borrowers, and owing far more despite having borrowed far less. All of these happening before the pandemic. This is indisputable, clinching evidence of a totally, catastrophically failed lending system.

The 45 million borrowers have obviously inculcated this. They have had over two years to reflect on the debt. They’ve seen trillions in economic stimulus (including $1 Trillion in PPP loans that don’t need to be repaid) thrown out to the country. Much of this stimulus has gone to millionaires, billionaires, and even colleges, who have never been in a stronger financial position than they are right now. All of these giveaways added to the national debt, and required money to be printed, or drawn from the Treasury. Federal student loans, on the other hand, can be cancelled without drawing even a penny from the Treasury or adding even a dime to the national debt.

Incidentally, “Student Loan Voters” represent, by far, the largest untethered voting bloc in modern American politics. The Biden campaign managed to temporarily win their votes in the 2020 Presidential election by promising to both return bankruptcy protections, and “eliminate” federal student loan debt for public college/HBCU borrowers earning less than $125k/year, but this allegiance has all but evaporated in view of his blatant betrayal of these voters in the days and months after his election.

The people have come to understand this, whether intellectually, or just viscerally. Most weren’t paying before the pandemic, almost none are paying at the present time, and if the Biden Administration ever gathers the nerve to attempt to turn this rigor-mortising lending system back on, it would be surprising if even 20% were paying a few months after they flip the switch.

Trying to turn Federal Student Loans back on.

Frankly, they shouldn’t pay. Conservative Grover Norquist (who hilariously now fights to turn the lending program back on), once said that government should be small enough that if needed, it could be “taken to the bath, and drowned in the tub”. This is precisely what is needed for this lending beast. It should not be fed. It should be starved, and that is what is happening.

Federal student loans are, for better or worse, vanishing into a mist of illegitimacy, and time only hardens this popular rejection. There is literally nothing that can be done to change this fact.

Lending systems fail from time to time. This has been true dating back to biblical times, and continues to be true to the present day. In the mid-eighties, for example, the S&L crisis saw the failure of a third of U.S. Savings and Loan Institutions, and the dissolution of the Federal Savings and Loan Insurance Corporation (FSLIC). More recently, the aforementioned Subprime Mortgage Crisis nearly took down the entire world economy.

Removing bankruptcy protections (and other consumer protections) uniquely from student loans lies at the core of the current failure, and is what differentiates it from the S&L and sub-prime failures. There is a good reason the Founders called for uniform bankruptcy laws ahead of the power to raise an army and declare war in the U.S. Constitution, and this craven, cruel violation of the spirit (and letter) of the law proves their wisdom in spades. While stripping bankruptcy away uniquely from student loans may have possibly served to compel repayment in year’s past, that utility is now gone.

The damage this vicious predatory loan scam has caused the citizenry to date has been massive. The damage it is poised to inflict upon the nation is incalculable. The people will no longer tolerate it. The loans will not be paid. The lending system is finished.

Congress cannot and will not cancel federal student loans. Paygo rules make it prohibitively expensive, and politically impossible. Instead, they should immediately pass S.2598, a bipartisan bill that will return bankruptcy rights to federal student loans, and compel modest repayment from the colleges when loans are discharged.

President Biden should immediately order the Department of Education to stop opposing all federal student loan borrowers in bankruptcy proceedings, cancel all federally owned loans, suspend the lending program indefinitely, put the colleges on direct funding (at a reduced rate) in the interim, and use that time to replace this failed lending program. Clear the books, call it stimulus, and start from scratch.

Biden can spend the next 2 1/2 years pretending that the federal student loan system is viable, and preside over a painful, messy, probably civilly-unrestful unwinding. Or, he can toss this train wreck on the scrapheap of failed U.S. policy experiments, and spend (possibly) the next 6 1/2 years creating an efficient, fair, and uncorrupted higher education financing system that actually works.

Below are just a few examples of the tens of millions of citizens who have been decimated by this shameless, government profiteering. They are willing to be interviewed.



Alan Collinge

I am Founder of StudentLoanJustice.Org, author of The Student Loan Scam (Beacon Press), and creator of the petition Change.Org/CancelStudentLoans