On Thursday (September 29), the Department of Education scaled back the student loan forgiveness plan to exclude Americans who had private loans that were guaranteed by the federal government with the exception of those who had begun the process to consolidate or convert their private loans into ones directly owned by the ED.
This means borrowers who took out loans under the Federal Family Education Loan (FFEL) Program, which saw the government act as a guarantor to private loans until the program ended in 2010, are no longer eligible for debt cancellation.
Similarly, borrowers under the Federal Perkins Loan Program, where the government guaranteed loans made by schools to students with exceptional financial needs until 2017, no longer qualify for Biden's plan.
An email announcing an “Update on the Biden-Harris Administration’s Student Debt Relief Plan” was sent out to those who were signed up for alerts on loan forgiveness, according to BuzzFeed News.
The Education Department also quietly changed the wording on its website Thursday.
“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 read 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 statement on the website says.
The announcement surprised the hundreds of thousands of affected borrowers, who were given no prior warning of the September 29 cutoff date to apply for consolidation.
The Biden administration had previously estimated that 43 million Americans who make less than $125,000 per year would qualify for relief under the loan forgiveness plan, which was set to wipe $10,000 of debt for borrowers or up to $20,000 of debt for Pell Grant recipients.
According to an Education Department spokesperson, 3 percent of previously eligible borrowers, or about 770,000 people, have been affected by Thursday's change.
Reports say the reversal was made in an effort to stop legal challenges that could derail the entire program.
As of Thursday, six Republican states are suing in federal court to end the program, which they claim was an overstep of Biden's legal authority.
The Education Department released the following statement Thursday to 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."