The Biden administration on Thursday announced a change to its plans to forgive student loans that will now exclude 770,000 Americans who had previously been eligible for debt forgiveness.
The policy change, believed to have been made in an effort to thwart legal challenges that could derail the entire program, will mean that Americans who had private loans that were guaranteed by the federal government will no longer be eligible for any forgiveness unless they had begun taking steps to consolidate or convert these private loans into ones owned directly by the Education Department.
The changes will affect borrowers who had taken out loans under the Federal Family Education Loan (FFEL) Program, which ended in 2010 and saw the government act as guarantor to private lenders.
It will also affect borrowers under the Federal Perkins Loan Program — which ended in 2017 and similarly saw the government guarantee loans made by schools to students with exceptional financial needs.
The announcement was made in an email seen by BuzzFeed News to those who had signed up for alerts on loan forgiveness. The email’s subject line was “Update on the Biden-Harris Administration’s Student Debt Relief Plan.”
“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,” new wording on the Education Department website reads as of Thursday. “Borrowers with FFEL Program loans and Perkins Loans not held by ED who have applied to consolidate into the Direct Loan program prior to Sept. 29, 2022, are eligible for one-time debt relief through the Direct Loan program.”
“ED is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED, including FFEL Program loans and Perkins Loans, and is discussing this with private lenders,” the website reads.
The announcement came as a surprise, and the affected borrowers had been given no warning that there would be a Sept. 29 cutoff date to have applied for consolidation.
An archived version of the same website shows that it previously read:
ED is assessing whether to expand eligibility to borrowers with privately owned federal student loans, including FFEL and Perkins Loans. In the meantime, borrowers with privately held federal student loans, such as through the FFEL, Perkins, and HEAL programs, can receive this relief by consolidating these loans into the Direct Loan program.
Biden’s student loan forgiveness plan, which was announced last month, allows Americans who make less than $125,000 to have up to $20,000 in debt forgiven if they received a Pell Grant or $10,000 if they did not. The administration had previously estimated that around 43 million Americans who met the income cap requirement would enjoy some form of relief.
Initially, people feared the change could affect a few million people. A spokesperson for the Education Department told BuzzFeed News on Thursday evening that 770,000 people will be affected — about 3% of previously eligible borrowers.
Reached for comment about Thursday's change, an Education Department spokesperson told BuzzFeed News:
Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal while we continue to explore additional legally-available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans, including whether FFEL borrowers could receive one-time debt relief without needing to consolidate. Borrowers with privately held federal student loans who applied to consolidate their loans into Direct Loans before September 29, 2022 will obtain one-time debt relief. The FFEL program is now defunct and only a small percentage of borrowers have FFEL loans. This is a completely different program than Direct Loans.
Biden’s plan has come under criticism and legal challenges from conservatives who decry the use of public money to wipe out student debt.
On Thursday, six Republican states moved to sue in federal court to stop the program, arguing Biden had overstepped his legal authority.
Earlier this week, a libertarian group also filed a lawsuit that argued the executive branch was not authorized to take such a step unilaterally.
But whether opponents would have proper legal standing for such a challenge has been a major potential barrier for Biden’s critics; anyone who sued to stop loan forgiveness would have to show in court that they were harmed by it.
That’s how loans under the FFEL and Perkins programs differed from other student loans. Private lenders and guaranty agencies who worked under those programs were regarded as potentially having standing in court to sue because of the financial losses they could endure under the loan forgiveness plan.
The Department of Education provided information on how many borrowers will be affected after this story was published.