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'A Great American Nightmare': Former Trump student loan official calls for radical overhaul of the system

Aarthi Swaminathan
·Reporter
·4 min read

A former top federal student loan official in the Trump administration says that the system he oversaw needs to be abolished and replaced.

A. Wayne Johnson, who is now running as a Republican for a Senate seat in Georgia after resigning in November 2019, wrote a letter urging the Senate to consider key reforms to the student loan machinery amid stimulus package negotiations amid the ongoing coronavirus pandemic.

The former chief operating officer of Federal Student Aid (FSA) suggested three ideas: Amending the law to allow student loans to be discharged under bankruptcy “without the condition of undue hardship” if the debt is more than 10 years old, removing all information relating to federal student loans from borrowers’ credit bureau files, extending the payment pause that President Donald Trump signed over the weekend to December 31, 2021.

Johnson, appointed by Education Secretary Betsy DeVos in 2017, added that cancelling debt at this time was “inappropriate” — that is, until the system itself was dismantled: “It is my position that the cancellation of Federal student loan debt should only be done at the same time that there is the abolishment of the current Federal Student Loan Program.”

A. Wayne Johnson. (Credit: A. Wayne Johnson)
A. Wayne Johnson. (Credit: A. Wayne Johnson)

The American Dream ... turned into a Great American Nightmare’

Although there are signs of the economy getting back on its feet, as the number of new unemployment insurance claims dip below 1 million, many borrowers are still holding substantial levels of student loan debt.

Johnson’s suggestion of easing bankruptcy laws may help those struggling financially to file for a bankruptcy discharge more easily, given that the current process is complex.

His suggestion to expunge student loan information from credit bureaus may be welcomed by consumer advocates. A recent report by U.S. PIRG of complaints filed on the Consumer Financial Protection Bureau website found that there has been a 50% increase in miffed consumers between March and July of this year, as compared to the year before. And the key complaint was credit reporting inaccuracies.

“These problems are nothing new. They've just been exacerbated by the current economic crisis caused by the pandemic. The truth is the credit bureaus are long overdue for an overhaul. In the interim, the least we can do is stop them from penalizing consumers who are struggling through no fault of their own," said U.S. PIRG Consumer Campaign Director Mike Litt in a press release.

(Graphic: David Foster)
(Graphic: David Foster)

House Democrats called for more lasting relief: The HEROES Act, which passed the House in May and was never taken up by the Senate, included $10,000 of student loan forgiveness for those “economically distressed” in addition to an extension of the interest-free payment pause on student loans and the suspension of debt collection.

In the letter, Johnson argued that any cancellation of federally-held “student loan debt, other than by way of allowing student loan debt to be cancelled under bankruptcy, would be haphazard and irresponsible if enacted on a standalone or reactionary basis.”

His solution would involve abolishing the system and replacing it “with Opportunity Plus Scholarship Grants of $50,000 for each high school graduate to use for job training or undergraduate higher education academic pursuit” as well as expanded Pell grants and new STEEM (Science, Technology, Education, Engineering, and Math) grants.

“The American Dream of a better life brought about by obtaining a level of higher education has turned into a Great American Nightmare due in large part to the phenomena of unchecked student loan debt,” the letter stated.

A student picks up her diploma during a graduation ceremony on May 6, 2020 in Bradley, Illinois. (Photo: KAMIL KRZACZYNSKI / AFP)
A student picks up her diploma during a graduation ceremony on May 6, 2020 in Bradley, Illinois. (Photo: KAMIL KRZACZYNSKI / AFP)

Johnson’s philosophy a ‘sudden shift’ in ED’s policy

Johnson’s departure from the Department of Education’s Federal Student Aid late last year was noteworthy.

After the announcement of his resignation, lawmakers Sen. Elizabeth Warren (D-MA) and Majority Whip Rep. Jim Clyburn (D-SC) wrote to DeVos and Johnson’s replacement at FSA, Mark Brown, asking about why Johnson became to see the system as dysfunctional.

“The public conclusions of Dr. Johnson, a top federal student loan official in the Trump administration until he resigned, represent a stunning departure from the policies of this administration,” the lawmakers wrote. “This sudden shift in policy position raises serious questions.”

Aarthi is a reporter for Yahoo Finance covering education. Follow her on Twitter @aarthiswami. If you are a student loan borrower who is struggling with your debt and would like to share your experience, reach out to her at aarthi@yahoofinance.com

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