Feds quietly change student loan forgiveness plan, excluding millions of borrowers from relief

It’s a reversal of fortune for millions of borrowers. The Education Department quietly made changes to the guidelines for its student loan debt relief plan. Hence, these changes will exclude millions of borrowers from receiving between $10,000 to $20,000 of forgiveness of student loans.

The change impacts borrowers who took out Perkins loans and Federal Family Education Loans several years ago. In particular, FFEL loans were guaranteed by the federal government, but they were managed by private banks before the program shut down in 2010.

NPR reported that 4 million borrowers currently have commercially-held FFEL loans. The Education Department advised these borrowers to consolidate these loans until federal Direct Loans. Hence, this would’ve made them eligible for the Biden administration’s debt relief program. But the advisement was removed on Thursday, indicating FFEL loans won’t be included in the forgiveness program.

According to NPR, the language quietly changed on the website, now reading, “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 change comes right before the Education Department is expected to open up applications for borrowers to request their student loan forgiveness. It’s recommended once the application process does open up in early October for borrowers to apply between then and Nov. 15 to guarantee forgiveness before the pause on payments ends on Dec. 31, 2022.

READ MORE: Student loan forgiveness deadlines that you need to know

An Education Department spokesperson told NPR, “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.”

Though no explanation was provided on why the department decided to remove the eligibility of commercially-held FFEL loans for student loan debt relief.