A graduate who calls himself “April Vendetta” protests student debt in New York’s Washington Square Park on May 19, 2021, after New York University’s virtual commencement ceremony.
Timothy A. Clary | AFP | Getty Images
Federal student loan borrowers whose loans are not held by the U.S. Department of Education will no longer be able to consolidate in order to qualify for President Joe Biden’s student loan forgiveness program, according to new department guidelines.
Updated Department of Education guidelines for one-time student debt relief are a U-turn from previous guidelines, which stated that such borrowers could consolidate their debts to direct loans in order to qualify for relief.
Biden announced plans to sweep student loan forgiveness in August. This includes up to $10,000 in forgiveness for federal borrowers and up to $20,000 in relief for Pell Grant recipients. To qualify, borrowers had to be below certain income thresholds – $125,000 for individuals and $250,000 for households.
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However, the plan’s announcement immediately raised questions about whether borrowers with the Federal Family Education Loans Program, or FFEL, non-government-held loans would also be eligible.
At the time, the Department for Education was exploring strategies to allow these “neglected borrowers”, who are estimated to be around 5 million, to be excluded from forgiveness.
However, the number of borrowers affected by this decision is around 770,000, according to an administration official. This is that some may be excluded based on income requirements, while others may qualify for relief based on other loans held by the government.
Those with FFEL loans held for business purposes have been excluded from the federal student loan payment pause that has been in place throughout the pandemic.
In an update to its website, the Department for Education now states: “Consolidation loans consisting of all FFEL or Perkins loans not held by ED are also eligible, as long as the borrower has requested consolidation before September 29, 2022”.
Student loan experts and borrowers were quick to express their shock as news of the policy change hit social media on Thursday.
“Just yesterday, the site said it was working on a solution for these borrowers,” said Betsy Mayotte, president of the Institute of Student Loan Counselors, tweeted. “It’s a punch, to say the least.”
The Department of Education is assessing whether there are other avenues to provide relief to borrowers with non-ED-held federal student loans, including FFEL program loans and Perkins loans, and discussing these with private lenders. ,” the website reads.