The Office of Federal Student Aid (FSA) is in desperate need of reform. The Biden Administration has weaponized student loan programs for political gain, placing an unfair burden on taxpayers while failing to create a sustainable system for borrowers. The Supreme Court ruled that Biden’s broad student loan forgiveness plan was unconstitutional, reinforcing that the executive branch lacks the authority to unilaterally cancel debt on such a large scale. Now, it is up to Congress and the next administration to correct these abuses and overhaul the federal student aid system for the benefit of both students and taxpayers.

Ending the Abuse of Loan Forgiveness Programs

The prior administration exploited the FSA’s loan forgiveness mechanisms, including borrower defense to repayment, closed school discharge, and Public Service Loan Forgiveness, to push sweeping student debt cancellation. Additionally, the repeated extension of the COVID-19 payment pause—long after the pandemic emergency had ended—was a blatant misuse of executive power. The new administration must put an end to these abuses by rolling back excessive loan forgiveness programs and ensuring that student aid is administered fairly and lawfully.

Returning to Market-Driven Lending

The federal government lacks the proper incentives to make sound lending decisions. The unlimited availability of federal student loans has driven up tuition costs and encouraged irresponsible borrowing. To fix this, the government should consider shifting back to a system where private lenders, backed by federal guarantees, compete to offer student loans. This would allow market forces to dictate interest rates and loan availability, ensuring students make informed borrowing decisions. Pell Grants, which operate on a voucher-like structure, should remain intact to provide financial assistance to low-income students.

A Long-Term Overhaul of Federal Student Loans

If Congress is unwilling to pursue major reforms, the Trump administration can take decisive action, including:

• Transitioning from FCRA accounting to fair-value accounting for more accurate cost assessment.
• Consolidating all federal loan programs into one income-driven repayment plan without interest subsidies or blanket loan forgiveness.
• Imposing borrowing limits to prevent excessive student debt accumulation.
• Requiring colleges to have a financial stake in student loan repayment, making them accountable for student outcomes.

Spinning Off Federal Student Aid into a New Government Corporation

To ensure professional governance, Congress should work with the Trump administration to restructure the FSA into an independent government corporation. This would prevent future administrations from using student loans as a political tool and introduce professional financial management practices. 

The Biden Administration’s reckless handling of student loans has placed unnecessary strain on taxpayers and the federal budget. It is imperative that Congress and the next administration take bold action to restore fiscal responsibility, ensure fairness, and protect the future of higher education financing