Trump’s Election Killed Loan Forgiveness for Millennials

As Joe Biden’s presidency ends, it’s clear his record makes him the most aggressive president in history on student-loan forgiveness. His Department of Education

• extended the COVID-19 interest-accumulation freeze;
• introduced the new SAVE plan, which offered unprecedented interest forgiveness;
• began the process of blanket forgiveness of up to $20,000 for borrowers.

The second and third initiatives were so aggressive that the judicial branch ultimately blocked them.

And, although student-loan forgiveness was not the headline of every speech by Vice President Kamala Harris, it was clear to voters that Democrats were the way forward for removing student debt.

Vice President Harris’s defeat sends a clear message. Student-loan forgiveness is dead for the foreseeable future. Harris’s defeat, then, sends a clear message. Student-loan forgiveness is dead—at least for the foreseeable future. It’s pretty safe to say that the majority of millennials have almost no chance to see it.

There are two major reasons why this is so. First, the basic math must be considered. The youngest millennials are around 28 years old. That means the average millennial who has gone to college has already graduated.

Any millennials who graduated before 2020 and went to the workforce have already paid one or more years into their loans. Loan payments were paused in 2020 and remained paused until early this year.

Even the youngest millennials will have paid at least 50 percent of their loans off over the next few years. There’s no chance of loan forgiveness in the Trump era (one hopes and assumes), so most millennials will pay four years of student loans during his term. When you add on the fact that most millennials had already begun paying before the 2020 pause, and the fact that most student-loan repayment terms are 10 years, it becomes clear that even the youngest millennials will have paid at least 50 percent of their loans off over the next few years. The older millennials will be even further into payments.

There are exceptions to this. Some borrowers get on plans with generous 20-year repayment terms. Others may work their loans into forbearance. However, the more people go this route, the more they risk massive interest accumulation. Furthermore, some students may leverage already existing loan-forgiveness programs such as Public Service Loan Forgiveness, but this is the exception rather than the rule.

However, there’s a second reason to believe that even the youngest millennials won’t see the tail-end of their balances forgiven. To see why, let’s consider why Harris lost and Trump won.

Regressive Progressive Woes

The story of Trump’s re-election is not that he won but how he won. Trump’s re-election came about because he over-performed with many demographics. Trump had record-breaking performances with Latino voters. For example, in Georgia, Harris won Latinos with a margin of +18 according to data from NPR. That sounds good until you consider that Hillary Clinton won that group by +40, and Biden won them by +25.

The same trend happened in Arizona and Nevada. In Michigan, Trump even won the Latino vote with a margin of +3. Biden won this group with +24 just four years ago. The same is somewhat true of black voters (for example, in Wisconsin, they swung 32 points away from Democrats relative to 2020).

However, it wasn’t all lost ground for Harris. In particular, the vice president did well with high-income, high-education voters. Data journalist Patrick Flynn shared the following graph on X:

Hard to overstate just how rapid the changes in US party coalitions have been.

The Democrats are now the party of high education *and* high income voters. Just 12 years ago, the inverse was true.

On these terms, the Trump coalition was closer to Obama 2008 than the Harris one! pic.twitter.com/7GqqT8G7rb

— Patrick Flynn (@patrickjfl) November 7, 2024

The visualization is stunning. In 2012, Republicans were the party of high-income, high-education voters. In the last three elections, Trump has reversed those trends. The gap between voters with and without formal higher education has not been greater in recent history.

It’s no surprise that Democrats are becoming the party of blanket student-loan forgiveness. The group that stands to gain the most from student-loan forgiveness is high-income, college-educated voters—in other words, supporters of Democrats. This is obvious because many high-income jobs (e.g. doctor and lawyer) involve taking on significant debt but reward graduates with high incomes.

The support from the high-income, educated voting bloc is not enough to carry an election. However, there’s a problem here. Harris lost. The support from the high-income, educated voting bloc is not enough to carry an election. Pandering to this group has come at the expense of Democrats losing hold of many of the voters who supported Obama in 2008 and 2012.

Those who don’t get degrees and have lower incomes (though not so low as to avoid paying taxes entirely) are on the hook to subsidize loan forgiveness with their tax dollars. Blanket student-loan forgiveness is thus a regressive tax. Student-loan forgiveness could be targeted to low-income recipients only, but that certainly isn’t how Biden positioned the topic by the 2024 election, and I didn’t see any rebuke from Harris of Biden’s approach.

The median voter theorem tells us that politicians win by appealing to the median rather than the outliers. This is why I think Trump’s election spells death for student-loan forgiveness. If Democrats learn from 2024, one of the lessons they’ll take away for 2028 is that they don’t need to expend more resources catering to high-education, high-income voters. The median voter theorem, if applicable to our system, tells us that politicians win by appealing to the median rather than the outliers.

Winning will mean re-focusing on gaining back demographics Trump has siphoned away, including degreeless voters for whom the only result of loan forgiveness is higher future taxes.

Even if Democrats win in 2028 (which is by no means a given), it seems unlikely that their candidate will focus on loan forgiveness at all, and, subsequently, it’s unlikely to happen. This means another four years on the clock. Even if the following election (2032) brought loan forgiveness back to the table, the executive, legislative, and judicial processes associated with it would likely cause the process to take a year or more. By that point, almost every millennial on a normal payment track will have paid off his or her loans completely.

All of this also ignores the looming reality of the conservative-majority Supreme Court, which seems likely to block the otherwise most politically tractable forms of loan forgiveness (as they did with Biden).

If there’s one thing we’ve learned from the last decade of American politics, it’s that things can change on a dime. With that in mind, I can’t declare student-loan forgiveness permanently dead. However, millennial student-loan forgiveness looks less alive than it has at any time in the last decade.

What Will Trump Do?

This leads us to another question—what will Trump do with student loans? We can’t be sure yet, but we have some ideas.

In his first term, one of Trump’s suggested budgets involved changing things such that fewer graduate-student loans are forgiven. Andrew Gillen, writing for the Martin Center, highlights that the current system leads to between 24 and 34 percent of graduate loan dollars not being repaid. Trump may target this issue again in his second term, which may help lower graduate tuition as demand falls.

Watch for Trump to rewrite the rules to allow students to leverage current education support for non-university pathways. His platform says, “To reduce the cost of Higher Education, Republicans will support the creation of additional, drastically more affordable alternatives to a traditional four-year College degree.”

On that note, Trump has mentioned the possibility of taxing university endowments to fund a higher-education alternative called American Academy, but there aren’t many details behind this proposal.

Questions remain on what Trump will do with students enrolled in the legally stalled SAVE plans or with students who have defaulted on loans. A likely option will be that many will transfer to income-based repayment plans, because those plans were instituted by Congress and are therefore beyond Trump’s reach.

Peter Jacobsen is an assistant professor of economics at Ottawa University and the Gwartney Professor of Economic Education and Research at the Gwartney Institute.