Issue Briefs

About

In total, student loan debt has reached approximately $1.7 trillion, though it is important to keep in mind that most of this debt is current and being repaid. And, while individual borrowing has risen, the total has also been driven by an increase in the number of borrowers, including those who returned to college during the Great Recession, and by a growing number of graduate students. The attention given to debt levels has prompted policy responses related to federal loan limits, the provision and timing of loan subsidies, repayment options, and the cancellation of student loan debt.

• On loan limits, there have been numerous legislative proposals to reduce federal loan borrowing limits to, ostensibly, reduce the amount of debt a student could incur through student loans. However, because federal funding is particularly important to students that cannot access alternative funding sources, lowering these limits would force many students into more expensive private loans and materially reduce access for students that cannot access them. Indeed, the One Big Beautiful Bill Act's (OB3) elimination of Grad PLUS and caps on graduate and Parent PLUS borrowing, have begun to do exactly that.

• On subsidies, there continues to be a debate about whether it is better to place loan subsidies on the front end, such as by eliminating interest accrual while enrolled in school, or the back end, such as by basing repayment amounts and forgiveness timelines on debt loads and earnings after graduation.

• On repayment, the major efforts to reduce repayment burden have been focused on income-based plans and time-based/public-service-based forgiveness, though borrowers have long faced a confusing array of options, an issue that the OB3's new Repayment Assistance Plan is intended to simplify.

• On cancellation, proposals have ranged from forgiving up to $50,000 to $10,000 per borrower, with some bills targeting $10,000 for economically distressed borrowers. This issue remains a topic of debate, though recent legislation and administrative efforts have curtailed cancellation efforts for now.

With public attention on student debt, default and collections are now front and center. The Department of Education restarted collections on defaulted loans in May 2025, including potential wage garnishment via the Treasury Offset Program after a pause dating to March 2020, and as of early 2026 fewer than 40 percent of borrowers were in repayment and almost 25 percent in default. In March 2026, Treasury and the Department of Education announced an interagency agreement under which Treasury assumes operational responsibility for collecting on defaulted federal loans.

History

Federal lending traces back to Title IV of the Higher Education Act of 1965. Borrowing climbed steadily through the 2010s as borrower counts and graduate debt grew, with the national balance dipping in 2023 before resuming growth in 2024 and 2025. The pandemic payment pause from 2020 to 2023, the litigation that blocked the President Biden’s SAVE student loan forgiveness plan, the 2025 restart of collections, and OB3's 2025 borrowing and repayment overhaul are the most recent inflection points.

On forgiveness, about 1.22 million borrowers have had balances cancelled through PSLF and related programs, totaling roughly $90.6 billion as of January 2026.