For student loan borrowers, the latest social media rumor sounds alluring: that the Elon Musk-led dismantling of the Department of Education and ensuing breaches of private data could cancel the debt they owe.
Creators argue that the Family Educational Rights and Privacy Act, passed in 1974 to protect the private of students’ educational records, gives borrowers grounds for dismissal. Their videos on TikTok have attracted hundreds of thousands of views in just a few days.
But experts say eliminating the debt is likely not that easy. The law was originally written with minors in mind, and its legal basis is untested, according to Katherine McKay, associate director at the Aspen Institute Financial Security Program. "It might be a challenge to look at being able to get the loans discharged that way," McKay said.
“This is something that has never been tried in this particular way,” McKay said.
The viral videos highlight a period of financial insecurity for 43 million borrowers who owe about about $1.64 trillion in outstanding federal student loans, according to U.S. Department of Education data.
“There is a lot of uncertainty about their repayment options, including knowing the benefits/consumer protections available to them in the future,” said Nicholas Hillman, professor at the School of Education at the University of Wisconsin-Madison. “This uncertainty creates financial insecurity when programs change or have unclear guidance for where they’re going.”
About half of current borrowers were not making payments before the Nov. 5 election, according to data compiled by the Aspen Institute.
And their fate is not clear-cut: About 8 million enrolled in the Biden-era SAVE income driven repayment plan have been waiting for months to find how their monthly payments will change under Trump’s policies, Hillman notes. Loan forgiveness under the SAVE plan remains blocked amid a legal challenge to the program.
Student loans could see a shift under the Trump administration. One of the ideological pillars of the second Trump term — the Heritage Foundation’s Project 2025 — calls for “privatizing all lending programs, including subsidized, unsubsidized, and PLUS loans.” The authors argue this would allow for “market prices” to enter the equation, “introducing consumer-driven accountability."
“Whatever Congress chooses to do with future loans, there is still the question of the government’s responsible stewardship of the existing student loan portfolio — a substantial taxpayer asset,” according to the Project 2025 authors. “The [Biden] administration has recklessly engaged in the policy fetish of forgiving and canceling student loans with abandon.”
As of late 2024, federal student loan defaults stood at nearly 5%, while private student loan defaults were at almost 2% as of early 2024. Advocates for borrowers’ rights argue that privatization could open the door to higher prices and predatory lenders.
Currently, student loan borrowers have about $140 billion in private student loans, according to nonprofit advocacy group Student Borrower Protection Center.
“These loans often carry high interest rates and contain fewer rights and protections for borrowers than federal student loans,” they said in a report. “This market also lacks basic transparency and reporting requirements. For these reasons, borrowers face a substantially heightened risk of harm as predatory actors are allowed to flourish.”
Shares