Dept. of Education Reverses Course On Some Student Loan Forgiveness

A change in the White House’s student loan forgiveness plan means millions of Americans no longer qualify.

The Education Department announced Thursday it would no longer allow borrowers with privately held student loans to receive debt forgiveness. Previously, people with the loans – known as Perkins loans and Federal Family Education Loans – could consolidate their loans and qualify for one-time student loan forgiveness.

That’s changed, however, a move that could exclude some 4 million borrowers from debt forgiveness.

In new verbiage on its website, the Education Department has this message:
“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. 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.”
President Joe Biden’s plan covers up to $20,000 in debt for people who received Pell Grants and $10,000 for others who hold federal student loans. To be eligible, individuals need to have a 2020 or 2021 Adjusted Gross Income, or AGI, of less than $125,000 or $250,000 for combined household income.
Commercially held FFEL loans were originally included in the Department of Education’s list regarding loan dismissal. No reason was given for the reversal, but Politico reports it comes amid growing legal opposition to the debt cancellation plan. Opposition from the loan holders – including private lenders, banks, guaranty agencies, loan servicers and investors – is strong and the group could potentially be the greatest legal risk to the debt relief program, according to the report.
The Education Department hasn’t commented on the legal challenges but said the change would speed up the loan forgiveness process.
“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,” an Education Department spokesperson said.


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