How Biden’s Student Loan Policies Affect Undocumented Students

The conversation around student debt in America is a roaring fire, casting long shadows and illuminating deep fissures in the nation's promise of opportunity. At the center of this fire, President Biden’s administration has thrown several buckets of water, initiating sweeping loan forgiveness plans, pauses on payments, and reforms to repayment systems. For millions of borrowers, these policies represent a lifeline. But if you listen closely to the edges of this heated debate, you’ll hear a group largely left in the cold, their voices often drowned out by the main event: undocumented students.

This is more than a policy oversight; it's a stark reflection of their liminal existence in the United States. While the nation grapples with the morality and mechanics of forgiving debt, undocumented students, often referred to as Dreamers, face a financial and educational labyrinth with no easy exits. Understanding how Biden’s policies affect them is to understand the very boundaries of inclusion, equity, and the American dream in the 21st century.

The Wall of Federal Aid: A Pre-Existing Condition

To grasp the present, we must first understand the past. The fundamental barrier for undocumented students isn't a new one. It's codified in law.

The Higher Education Act and DACA's Limits

The 1996 Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) and the Higher Education Act effectively bar undocumented immigrants from accessing federal student aid. This includes Pell Grants, Federal Work-Study programs, and most critically, federal student loans. This creates an immediate and profound disadvantage. While their citizen classmates can finance their education through federally-backed loans with relatively low interest rates and flexible repayment options, undocumented students are forced to look elsewhere.

The Deferred Action for Childhood Arrivals (DACA) program, established in 2012, provided a temporary respite for some. DACA recipients, often called "Dreamers," receive protection from deportation and work authorization. However, DACA does not confer lawful permanent resident status or citizenship. Consequently, it does not lift the federal aid ban. A DACA recipient is in the same boat as any other undocumented student when it comes to filling out the FAFSA—they are ineligible.

The Financial Squeeze of Alternative Funding

So, how do they pay for college? The paths are few, difficult, and often financially perilous.

• State and Institutional Aid: A handful of states, like California, New York, and Texas, have chosen to allow undocumented students who meet certain criteria (e.g., graduation from a state high school) to qualify for state financial aid and pay in-state tuition. This is a crucial lifeline, but it's a patchwork system, inconsistent and unpredictable across state lines.
• Private Scholarships: These are highly competitive and often insufficient to cover the full cost of attendance.
• Private Student Loans: This is where the trap often springs shut. Without a U.S. citizen or permanent resident co-signer, securing a private loan is nearly impossible. Even with a co-signer, the terms are starkly different from federal loans: higher interest rates, less flexible repayment plans, and no access to forgiveness or income-driven repayment programs. They are a hard, commercial transaction, devoid of the safety nets woven into the federal system.

Biden's Loan Forgiveness: A Door Closed, Not Opened

This brings us to the heart of the matter: President Biden’s headline-grabbing student loan policies. The most prominent of these was the broad-based forgiveness plan, announced in August 2022, which aimed to cancel up to $20,000 in federal student debt for Pell Grant recipients and up to $10,000 for other borrowers.

The Ineligibility Clause

For undocumented students, the announcement was a non-starter. The plan was explicitly for borrowers with federal student loans held by the Department of Education. Since undocumented students are legally prohibited from having such loans, they were automatically and entirely excluded from this potential relief. It was a reminder that even in a moment of historic debt cancellation, the wall built in 1996 still stood firm.

The Supreme Court's eventual striking down of the plan was a blow to millions, but for undocumented borrowers, it was a peculiar form of irony. They experienced the collective disappointment, but without ever having been eligible for the hope in the first place.

Beyond Broad Forgiveness: The SAVE Plan and Other Reforms

The Biden administration's efforts aren't limited to one-time forgiveness. A significant policy is the Saving on a Valuable Education (SAVE) plan, an income-driven repayment (IDR) program that caps monthly payments at a lower percentage of discretionary income and forgives remaining balances after a set number of years.

Once again, the same rule applies. The SAVE plan is for federal loan borrowers. Undocumented students, burdened by private loans, cannot enroll. They cannot benefit from the capped payments, the interest subsidy (where unpaid interest is waived), or the forgiveness timeline. Their private loans continue to accrue interest at the agreed-upon rate, regardless of their income or life circumstances.

Other administrative actions, such as the fixes to the Public Service Loan Forgiveness (PSLF) program and targeted relief for borrowers who were defrauded by their institutions, are also off the table. They are federal remedies for a federal problem, a club they are not allowed to join.

The Ripple Effects: Beyond the Balance Sheet

The impact of this exclusion is not merely a line item on a budget; it's a multi-generational weight with profound psychological and social consequences.

The Psychological Toll and the Opportunity Gap

Imagine working just as hard, achieving just as much, and yet being systematically denied the tools to build your future. The constant financial anxiety leads to impossible choices: taking on excessive hours at work, which hurts academic performance; enrolling part-time, which delays graduation; or worse, dropping out altogether. The dream of becoming a doctor, engineer, or teacher is often crushed under the sheer weight of financial impossibility.

This creates a self-perpetuating cycle of inequality. Without the ability to invest in their education freely, undocumented graduates—even those who beat the odds—start their careers with higher debt burdens and fewer resources, limiting their economic mobility and their ability to build wealth for their families and communities.

The DACA Dilemma and Political Precarity

For DACA recipients, the situation is especially galling. They are legally authorized to work and pay taxes, including into the very system that denies them educational benefits. They contribute to Social Security and Medicare, programs from which they may never see a return. Their exclusion from student debt relief is seen by many as a profound contradiction—a recognition of their value to the workforce while simultaneously ignoring the barriers to their professional advancement.

Furthermore, the constant legal challenges to DACA create an atmosphere of extreme precarity. Investing tens or even hundreds of thousands of dollars in a private education is a monumental risk when your legal status to remain and work in the country could be revoked by a future court ruling or administration.

A Path Forward: Demanding Equity in the Debt Debate

The conversation around student debt cannot be complete without addressing this glaring inequity. Solutions exist, but they require political will and a reimagining of who deserves a chance at an affordable education.

Legislative Solutions: The Dream Act and Beyond

The most permanent solution is comprehensive immigration reform, specifically the passage of a clean Dream Act, which would provide a pathway to citizenship for Dreamers. With citizenship, the federal aid ban would dissolve, and they would finally have equal access to the financial system that supports their peers.

Short of that, legislators could propose bills that explicitly extend federal student loan access, or create a parallel federal loan program, for undocumented students and DACA recipients. This would be a monumental political fight, but it directly targets the problem.

Institutional and State-Level Courage

While federal policy is stalled, states and individual institutions must pick up the slack. More states should follow the lead of California and others by expanding access to state financial aid and in-state tuition for all undocumented residents. Universities can create dedicated scholarship funds, offer more institutional grants, and provide robust financial counseling tailored to the unique challenges these students face.

Reframing the Narrative

Ultimately, this is about more than loans; it's about belonging. Including undocumented students in the debt conversation is a statement that their dreams and their contributions are valued. It acknowledges that the talent and drive of a young person should not be held hostage by their immigration status. The fight for student debt justice is intrinsically linked to the fight for immigrant justice. As the Biden administration continues to navigate the complex politics of student loans, it must not forget those who stand just outside the frame, waiting for a promise to be fulfilled. Their future, and the future of the country they call home, depends on it.