Current Events > Biden's Education Department Changes Course, Excludes Millions From Loan Relief

(+) Yeah! (+)

In a remarkable reversal that will affect the fortunes of millions of student loan borrowers, the U.S. Department of Education has quietly changed its guidance around who qualifies for President Biden's sweeping student debt relief plan.

At the center of the change are borrowers who took out federal student loans many years ago, both Perkins loans and Federal Family Education Loans. FFEL loans, issued and managed by private banks but guaranteed by the federal government, were once the mainstay of the federal student loan program until the FFEL program ended in 2010.

Today, according to federal data, more than 4 million borrowers still have commercially-held FFEL loans. Until Thursday, the department's own website advised these borrowers that they could consolidate these loans into federal Direct Loans and thereby qualify for relief under Biden's debt cancellation program.

On Thursday, though, the department quietly changed that language. The guidance now says, "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."

It's unclear why the department reversed its decision on allowing FFEL borrowers with commercially-held loans to consolidate and then qualify for debt relief.

In a statement to NPR, a department spokesperson says, "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."

The tell in that statement is "legally-available."

Multiple legal experts tell NPR the reversal in policy was likely made out of concern that the private banks that manage old FFEL loans could potentially file lawsuits to stop the debt relief, arguing that Biden's plan would cause them financial harm.

When FFEL borrowers consolidate their old loans into federal Direct Loans, these private banks essentially lose business. If these banks' financial health depends, at least in part, on the assumption that they would be holding and profiting from these debts over the long-term, then losing borrowers to Biden's debt relief plan could, possibly, constitute harm.

"FFEL lenders have shown their true colors. Instead of working in the interest of student loan borrowers their customers these lenders are holding hostage relief to millions of borrowers in order to keep making a buck off of borrowers suffering," says Persis Yu, of the Student Borrower Protection Center.

Changing the policy now, and limiting the number of FFEL borrowers who can conceivably qualify for debt relief, may make these FFEL banks less likely to legally oppose debt relief.

It's unclear why the department reversed its decision on allowing FFEL borrowers with commercially-held loans to consolidate and then qualify for debt relief.

Oh those poor fucking banks who would lose money.

What a shitshow.

In fact, a new lawsuit filed Thursday by six state attorneys general, makes this very argument. One of the plaintiffs, Missouri, is home to MOHELA, which manages both federal Direct Loans and these old FFEL program loans.

Wonder why the TC left that specific part of the article out in the OP.

Why does this country have such a problem with people trying to get an education?

It's already enough work to paste the whole text of the article with all the ad space and extra text that has to be filtered out, I wasn't about to upload each screenshot and document as well. No ulterior motive here.

Dumbass doing this right before midterms.

Someone very rich and very powerful complained.

This is text, so I'm not sure if that's sarcasm against the TC or you forgetting to switch alts to try and justify why you skipped over a single paragraph with important context to the situation (even has a link to the court document).

I'm legitimately confused here then -- what paragraph are you saying I skipped?

In fact, a new lawsuit filed Thursday by six state attorneys general, makes this very argument. One of the plaintiffs, Missouri, is home to MOHELA, which manages both federal Direct Loans and these old FFEL program loans.

So, reading the court document further, the lawsuit these 6 states have brought is seeking to stop the entire rollout of student loan relief that's set to start early next month using all of this FFEL stuff as a basis for their argument.

This is most likely the Biden admin's (crappy) way to trying to negate that. Probably some argument like "Well we're not letting them get rid of FFEL loans, so your whole lawsuit has no ground to stand on." Still sucks though.

Billionaire corporate donors got mad they weren't getting the money I guess

It 100% sucks what the Biden admin is doing here, but there's a bit more context here than just "Joe Brandon bad". Wonder why the TC left that specific part of the article out in the OP.

So how many will still qualify after this decision, anyone have the rough numbers?