The Biden administration quietly changed its policy on who is eligible for student-debt “relief” on Thursday, scaling back its promise to millions amid legal challenges.
Until Thursday, the Department of Education’s website advertised that borrowers with privately held federal student loans — Federal Family Education Loans (FFEL) or Perkins Loans — should consolidate their loans into the Direct Loan program to be eligible for up to $20,000 of student-debt “relief.”
The website was modified with no announcement Thursday morning. It now reads, “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.”
FFEL borrowers with Direct Loans are still eligible to consolidate those loans, an administration official told NPR, but that policy is not reflected on the website.
While 4.1 million Americans have privately held loans, the policy change will only affect around 800,000 people, the official said, adding that, “the FFEL program is now defunct and only a small percentage of borrowers have FFEL loans.”
“The Department of Education’s website says that it’s “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 policy reversal comes as the Biden administration has faced its first legal challenges to the student-loan “forgiveness” order.
On Tuesday, the Pacific Legal Foundation issued the first lawsuit against the administration’s policy, arguing that student-loan borrowers in states like Indiana, Wisconsin, Minnesota, Arkansas, and North Carolina, would be unfairly taxed for the student-loan “forgiveness” under President Joe Biden’s program. Those enrolled in the Public Service Loan Forgiveness program have their debt relief automatically applied under Biden’s program, and because Biden’s “forgiveness” is taxed and the Public Service Loan Forgiveness program is not in those states, recipients would be hit with an unforeseen tax.
On Thursday, Six Republican attorneys general from Nebraska, Missouri, Arkansas, Kansas, Iowa, and South Carolina issued a lawsuit against the Biden administration, arguing that Biden’s unilateral decision to “cancel” debt is unconstitutional.