Joe Biden Student Debt Research Reveals How Forgiveness Promises Backfired on Millions of Borrowers

There is something quietly devastating about building a financial plan around a promise that never arrives. That is essentially what millions of American student loan borrowers did during the Biden years — and a new wave of research is beginning to put hard numbers to that consequence.

Economists from Purdue University, the University of Cambridge, and the University of Chicago examined what happened to borrowers who sincerely thought student loan forgiveness was imminent in a working paper. The results are unsettling. The likelihood of those borrowers making monthly loan payments was 30% lower. They repaid their debt for about $100 less each month. Additionally, they had a 7.5% higher likelihood of being 90 days or more past due on their loans as of May 2025. It turns out that the anticipation of relief quietly caused harm of its own.

It is possible to understand why so many people believed it. In August 2022, Biden took the podium and referred to his plan as a “game changer,” but it wasn’t a casual comment. He talked about people starting families and businesses, purchasing homes, and emerging from debt. The wording was precise and upbeat. Approximately 16 million Americans had already received federal assistance approval by November of that year. Nine million people received emails from the Department of Education informing them of their approvals, despite the fact that the program was already being blocked by courts. The announcements continued even though the ground beneath borrowers’ feet was shifting.

Constantine Yannelis, one of the study’s authors, puts it plainly: borrowers were making plans based on information that turned out to be incorrect. They weren’t making the best loan repayments. They were not making sound long-term financial decisions. And that has actual repercussions for their financial well-being in real life, not just on paper, he claims.

The timing made things considerably worse. One of the worst spikes in inflation in recent American history occurred nearly exactly at the same time as the early pandemic payment pauses and the peak of loan forgiveness optimism. When the uncertainty subsided, borrowers who postponed making durable purchases, such as homes, vehicles, and appliances, discovered that the prices of those same items had increased dramatically. Between March 2020 and March 2025, the average American home price increased by more than 34%. The number of new cars increased by over 20%. Waiting, for many, turned out to be expensive.

With the borrowers she counsels, Betsy Mayotte, the director of the Institute of Student Loan Advisors, has been observing this unfold in real time. People who received official letters stating their loans would be forgiven only to later receive bills or find out they were already in default, according to her description of a recurrent pattern. “They’re like, ‘Wait a minute, I thought my loans were gone,'” she replied. There’s a certain sting to that phrase. It is not the language of someone being careless with money. It is the language of a person who structured their life around formal communication and trusted it.

The collapse of the SAVE plan adds another layer to an already complicated picture. Biden’s last effort to make monthly payments manageable for lower and middle-income borrowers has now been dismantled following a legal settlement. The program gives more than 7.5 million borrowers 90 days to change to a different repayment plan. The shift is noticeable and instantaneous for individuals like Toby Ward, a clinical social worker in Michigan who provides counseling to terminally ill children and their families. His monthly payment increased from $0 to $180. That is not a rounding error in a budget already strained by growing healthcare expenses and general price increases.

There is no clean conclusion to any of this. The Biden administration did cancel more than $180 billion in student loans — more than any administration in history. The research problems it was trying to address were real. For many Americans, student loan debt actually makes homeownership unaffordable. There is no real doubt about the programs’ motivations. However, the new research indicates that the manner in which those intentions were expressed—with assurance that the political and legal landscape could not ultimately sustain—caused its own set of financial losses.

Yannelis frames the broader lesson as a warning about policy uncertainty in an era of deep political polarization. Rules are subject to change as administrations do. Courts can intervene. Plans based on the pledges of a single administration can fall apart practically overnight. This uncertainty is real for borrowers of student loans. Credit reports, missed payments, and the rising cost of a home while they waited for relief that never materialized are all examples of how it manifests.