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The Biden administration just revised the student loan forgiveness regulations

By: April Carson

The US Department of Education has made a significant change to its guidance on who qualifies for President Obama's comprehensive student debt relief plan, in a stunning turnaround that will impact the financial well-being of many borrower.

The change is largely being driven by borrowers who took out federal student loans years ago, both Perkins Loans and Federal Family Education Loans (FFEL). Before the FFEL program ended in 2010, FFEL loans were issued and managed by private banks but guaranteed by the federal government. Many of these loans are now being processed by the Department of Education for loan forgiveness.

As of today, there are still more than 4 million borrowers with commercially-held FFEL loans. However, until recently the Department's website stated that these borrowers could consolidate their loans into federal Direct Loans and thereby qualify for relief under President Biden's debt cancellation program. But that's no longer the case.

On Thursday, the department quietly modified that wording. The advice now reads, "Borrowers with federal student loans not held by ED who wish to consolidate their debts into Direct Loans as of Sept. 29, 2022 will be unable to do so."

The change in wording is significant because it means that millions of borrowers who were depending on loan consolidation to qualify for relief will no longer be able to do so. It's not clear why the department made the change, but it comes as the Biden administration is under pressure to make debt cancellation more targeted and fair.

NPR was told by an administration official that approximately 800,000 borrowers would now be excluded from relief. Even though many more borrowers could end up receiving less support than they were lawfully entitled to under the old guidance. For example, these are the 1.5 million FFEL borrowers who also have Direct Loans; their Direct Loans still qualify for cancellation even though their FFEL loans no longer do. The administration says it's still working on a fix for this problem.

These changes come as the Biden administration is also reconsidering its stance on debt cancellation more broadly. Last week, Education Secretary Miguel Cardona said the department was taking a "fresh look" at how to make debt cancellation more targeted and effective. He didn't give any specifics, but any move in that direction would be welcome news for the more than 40 million Americans who are currently struggling with student loan debt.

The department's decision to allow FFEL borrowers with commercially-held loans to consolidate and then qualify for debt relief is unclear.

"We are currently working to validate the information provided by borrowers," says a Department of Education official, "and will continue to do so until we have completed processing all submitted applications. Our objective is to help as many eligible borrowers as quickly and easily as feasible, and allowing us to achieve that goal while we explore additional legally available options for providing relief to borrowers with privately owned FFEL loans and Perkins Loans, including whether FFEL borrowers could receive one-time debt relief without having to consolidate, is important." Borrowers who applied to consolidate their privately held federal student loans into Direct Loans before September 29, 2022 will be granted one-time debt relief. The FFEL program is no longer operational and very few borrowers still have FFEL loans."

Several legal experts told NPR that the policy reversal was likely due to worries that private banks who manage old FFEL loans could sue to stop debt relief, claiming Biden's plan would hurt them financially.

The administration's shift will likely mean more borrower defense claims are approved. But it's unclear how many people will actually see their loans forgiven, given that the process is long and complicated.

If private banks' financial well-being partly rests on the prediction that they will profit from borrowers’ loans in the long run, then taking away business from these banks by federal Direct Loan consolidation could be considered damage.

In fact, a new lawsuit filed Thursday by six state attorneys general makes the same point. Missouri is one of the plaintiffs, and it manages both federal Direct Loans and old FFEL program loans under MOHELA, according to one of the claimants.

The attorneys general allege that the federal government’s decision to move towards Direct Loans “has inflicted serious harm on state higher education lending agencies.”

According to the lawsuit, "the consolidation of MOHELA's FFELP loans harms the entity by depriving it of an asset (the FFELP loans themselves) that it currently owns." "The consolidation of MOHELA's FFELP loans harms the entity by causing the entity to lose income from those payments," it continues. If a borrower consolidates their loans, MOHELA will no longer receive payments on the old FFEL program loan.

The state is also concerned about "the potential for an increase in defaults on the new consolidated loan." If a borrower consolidates their loans and then defaults, the entire balance of the new loan could become immediately due and payable—something that wouldn't happen with the old FFEL program loans.

The lawsuit is asking the court to declare the new regulations unlawful and put a stop to them. It's unclear how long this process could take or what the outcome will be.

The policy change, which will make it harder for FFEL borrowers to qualify for debt relief, may stop the banks who give out these loans from opposing debt relief in court. But it will likely also create more borrowers who are struggling to repay their loans.

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About the Blogger:

April Carson is the daughter of Billy Carson. She received her bachelor's degree in Social Sciences from Jacksonville University, where she was also on the Women's Basketball team. She now has a successful clothing company that specializes in organic baby clothes and other items. Take a look at their most popular fall fashions on

To read more of April's blogs, check out her website! She publishes new blogs on a daily basis, including the most helpful mommy advice and baby care tips! Follow on IG @bossbabymav



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