The Biden administration quietly changed the fine print of it student loan debt forgiveness plan Thursday, cutting hundreds of thousands of borrowers out of the sweeping program.
The change to the Department of Education website, made without announcement amid legal challenges, leaves out Federal Family Education Loans, which included the once-popular Perkins loans. Those loans were issued by private banks but guaranteed by the government under a program that the Obama administration ended in 2010. The site previously advised those borrowers to consolidate the loans into the federal Direct Loan program in order to be eligible for up to $20,000 of relief.
“As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans,” the site now advises, although it says borrowers who consolidated and applied before September 29 remain eligible for relief.
JUST IN: In a remarkable reversal that will affect the fortunes of millions of student loan borrowers, the U.S. Department of Education quietly changed its rules on who is eligible for President Biden's comprehensive student debt relief program. https://t.co/Hsg5CSkBII
— NPR (@NPR) September 29, 2022
More than 4 million borrowers still have commercially-held FFEL loans, but officials said only about 800,000 are expected to be affected. That’s because many either are not eligible for relief under income guidelines or have other outstanding student loans that are eligible to be forgiven.
The reversal follows legal challenges to the Biden administration’s sweeping plan, which the Congressional Budget Office estimates will cost $400 billion.
The Pacific Legal Foundation earlier this week sued, arguing that student-loan borrowers in states including Indiana, Wisconsin, Minnesota, Arkansas, and North Carolina, would be unfairly taxed to fund the program. The foundation argued that because those states do not tax loans forgiven under the Public Service Loan Forgiveness program, and enrollees are automatically covered by the Biden administration’s program which does tax the debt relief, recipients would be hit with an unjust tax.
The Biden admin. changed conditions for student loan relief — disqualifying millions of people.
Borrowers with federal loans owned by private banks through FFEL no longer qualify, unless they applied to consolidate them into Direct Loans owned by the Dept. of Ed before Sept. 29. pic.twitter.com/3vTdLOWbLQ
— AJ+ (@ajplus) September 29, 2022
On Thursday, Six Republican attorneys general from Nebraska, Missouri, Arkansas, Kansas, Iowa, and South Carolina sued, arguing that the unilateral order to erase student loan debt is unconstitutional.
NPR reported that the reversal could also be linked to concerns private banks who hold FFEL loans could also sue, claiming the plan would cost them business when borrowers consolidate their old loans into federal Direct Loans, the outlet reported.