Exclusive: New Biden student loan plan unveiled amid agency funding crisis

NPR

Cory Turner

January 10, 2023

The Biden administration is unveiling an ambitious new student loan repayment program today that will be more generous, flexible and forgiving than previous plans — but it’s unclear how or when the administration will be able to fully implement it.

The U.S. Department of Education says proposed updates to its income-driven repayment plan would, among other things, cut loan payments in half for undergraduate borrowers, but its rollout could be complicated by the fact that the Office of Federal Student Aid (FSA) — the agency that oversees the government’s student loan portfolio — is in an unexpected funding crisis, created by a political fight between Congressional Republicans and Democrats, and the White House.

Behind closed doors, officials at FSA and the U.S. Department of Education are surprised and angry, sources tell NPR, because they must now safeguard priorities like today’s announcement while also scrambling to find hundreds of millions of dollars to cut from other current and future programs.

In December, Congress approved a massive, $1.7 trillion government funding bill known as an “omnibus,” but the bill did not deliver nearly enough money for FSA to do everything it has been asked to do in 2023 — by Congress, the Biden administration and even the courts.

A “big f***ing deal” is how one federal official describes the surprise decision, last month, to abandon a much-needed funding increase for the Office of Federal Student Aid.

Another person familiar with FSA’s inner workings worries that the result, not just for the agency but for people with federal student loan debts, could be “catastrophic.”

“There is a lot of work at FSA that can benefit students and borrowers that it simply cannot do now,” says a third government official.

That work includes not only recent initiatives but also potentially basic, everyday loan oversight functions — like making sure loan servicing companies don’t keep borrowers waiting hours on the phone to talk with a customer representative.

This is the story of the politics behind the funding crisis, and why any resulting cuts would hurt millions of borrowers. It is based on the accounts of ten people, including eight officials across government who are familiar with FSA’s inner workings but who are not authorized to speak publicly.

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