Biden’s Student Borrower Forgiveness Program Updated to Exclude Private Loans
President Biden’s student loan cancellation plan was abruptly updated Thursday to exclude borrowers with private federal student loans, according to Department of Education guidelines.
As of Thursday, borrowers with federal student loans not held by the Department of Education are no longer eligible for one-time debt relief by consolidating those loans into direct loans, the councils said.
The department said only Federal Family Education Loan (FFEL) program borrowers whose loans are held by the federal government are eligible. The FFEL program, which ceased making loans in 2010, was a student loan system in which private banks handled the loans but were guaranteed by the federal government.
Borrowers with private loans through the FFEL program and Perkins loans who had applied to be consolidated into the direct lending program before Thursday — when the administration updated its guidelines — are still eligible for one-time debt relief through the direct lending program.
The Department of Education also said it is “evaluating whether there are other avenues to provide relief to borrowers with federal student loans not held by ED, including FFEL program loans and Perkins loans, and discuss it with private lenders”.
More than 4 million student borrowers have private loans under the FFEL program, according to NRP.
Biden’s student loan forgiveness plan is expected to forgive up to $10,000 in federal student loan debt for borrowers earning less than $125,000 and up to $20,000 for borrowers who received Pell Grants.
Earlier this week, the Congressional Budget Office announced that the plan would cost around $400 billion. It also projected that 90% of income-eligible borrowers would seek debt cancellation.
The White House pushed back against the report, saying 90% of eligible borrowers are unlikely to take advantage of the program.
Biden’s plan also faced the first of its legal challenges this week.
Six Republican-led states filed a lawsuit Thursday against the administration in U.S. District Court for the Eastern District of Missouri, arguing the proposal is illegal because there is no statute of Congress authorizing the nullification. student loan debt.
Earlier this week, the public benefit corporation Pacific Legal Foundation filed a lawsuit against the administration, challenging it through a plaintiff who is currently repaying loans and would be subject to a costly tax if debt relief because he lives in Indiana, one of several states that consider debt forgiveness taxable income.
The White House cited the Heroes Act to justify the pardon program when pressed on how it would defend itself in court against legal challenges.
The law allows the Department of Education to waive or modify laws or provisions relating to student financial assistance programs during times of war or national emergency, the COVID-19 pandemic being a justification for the debt cancellation.