Some borrowers will no longer be eligible for student loan forgiveness after changes to a plan first unveiled by President Joe Biden last month.
In August, after months of speculation and anticipation, Biden announced his plan to eliminate up to $10,000 in federal student loan debt for borrowers with an annual income of less than $125,000. The plan also includes up to $20,000 in student debt relief for Pell Grant recipients whose loans are held by the federal government.
The U.S. Department of Education recently updated its guidance related to those loans handled by private lenders but guaranteed by the government, including Federal Family Education Loans (FFEL) and Perkins loans, according to news reports.
“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 education department’s website now states.
CNN reported about 770,000 borrowers will be impacted.
The education department said it 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.”
In a written statement, the education department said its goal is “to provide relief to as many eligible borrowers as quickly and easily as possible.” It said that the change “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.”
The education department said that borrowers with privately held federal student loans who applied to consolidated those loans into federal direct loans before Sept. 29 will receive one-time debt relief.
The change comes as Biden’s debt forgiveness plan faces a lawsuit filed by six states Thursday. That legal challenge, which specifically raises questions about loans through the FFEL program, asks for an immediate temporary restraining order to halt the program.
Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina are challenging the debt cancellation, calling it “economically unwise and downright unfair.”
The suit states: ”No statute permits President Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed.”
About 15% of Georgia residents have student loan debt. Their average debt is nearly $42,000, federal statistics show.
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