Willie R. Tubbs, FISM News
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Borrowers with older debts might receive no benefit from President Joe Biden’s student loan forgiveness plan.
As first reported by NPR, the Department of Education on Thursday changed its guidelines on who would be eligible to receive either $10,000 or $20,000 in student debt forgiveness. The modification came with no fanfare.
The people affected by this change are those who hold Perkins loans and Federal Family Education Loans that are serviced by private firms. It’s easy to forget that, prior to the Obama administration, many student loans were serviced by non-governmental organizations.
Several generations of college students enlisted the services of companies like Sallie Mae to gain access to loans and, until Thursday, the Department of Education was touting that people who held such loans could become eligible for Biden’s forgiveness program by consolidating their debt into a federal Direct Loan.
But the new language removes this option.
“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 department’s website reads.
While some 4 million borrowers hold privately-serviced loans, NPR reports 800,000 people will be affected. The reason for the discrepancy is that about 3.2 million borrowers hold both federal and privately-serviced loans, meaning they would still be eligible to apply for relief to the former.
Through a statement to CNN, the Department of Education said the goal was still helping as many people as possible receive a benefit from the forgiveness program.
“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,” the statement reads. “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. This is a completely different program than Direct Loans.”
There remains the distinct chance that no one, anywhere, receives a dime in student debt relief. Numerous states’ attorneys general are suing to prevent Biden from disbursing the funds.
Missouri, Arkansas, Kansas, Nebraska, and South Carolina’s attorneys general, as well as legal representatives from Iowa, have filed a suit in federal court arguing that student loan forgiveness will cause financial harm to servicers.
https://twitter.com/AGEricSchmitt/status/1575524609843089410
“The Biden Administration’s executive action to cancel student loan debt was not only unconstitutional, it will unfairly burden working-class families and those who chose not to take out loans or have paid them off with even more economic woes,” Missouri Attorney General Schmitt said in a statement. “The Biden Administration’s unlawful edict will only worsen inflation at a time when many Americans are struggling to get by.”
Schmitt and company’s lawsuit is predicated on three general arguments: that the Biden administration has violated the separation of powers laws, exceeded its Constitutional authority, and violated the Administrative Procedure Act through an “arbitrary and capricious” action.
The final claim serves as a catch-all accusation that Biden’s actions were done outside proper channels and beyond the bounds of the law, or otherwise exceed the authority of his office.
As quiet as the Biden administration was about the modification of its list of beneficiaries, it was loud and proud about the coming cost of the loan forgiveness program.
On Thursday, the Department of Education announced that, based on its estimates, the program will cost an average of $30 billion a year for 10 years. The DOE’s price tag, about $305 billion, is substantially lower than the predictions of the Congressional Budget Office, which has the program costing nearly $400 billion.