The Biden administration just changed the rules for student loan forgiveness The Biden administration has quietly changed its guidance to disqualify borrowers who have privately-held FFEL and Perkins loans.

In a reversal, the Education Dept. is excluding many from student loan relief

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Earlier today, the Biden administration quietly reversed course on who qualifies for the president's sweeping student loan relief plan. Many borrowers who Biden had promised to help will now be left out. NPR's Cory Turner spotted the change on the Education Department's website this morning and joins us now. Hi, Cory.


SUMMERS: So, Cory, what has changed here?

TURNER: Yeah. So this morning, I was looking over the department's loan relief guidance for a very specific group of borrowers. These are people with Federal Family Education Loans. They're known as FFEL loans. These are issued and managed by private banks, but they're guaranteed by the federal government. And until this morning, the Education Department's website said these borrowers could qualify for debt relief. They just needed to consolidate those loans into federally held direct loans.

But then I noticed, around 11:15 or so, that guidance completely changed. The website now says these borrowers do not qualify for debt relief unless they started the process of consolidating their loans before today, Juana. The big question - how many people are we talking about? - is complicated. We know roughly 4 million have these commercially held FFEL loans, but we also know that many of them will still qualify because they also happen to have direct loans. Just before coming on air, I spoke with an administration official who assured me the number is much lower - maybe around 800,000 borrowers - who could have qualified but now won't. Part of this is we'll wait and see.

SUMMERS: Cory, to me, this sounds pretty significant, but also, like, the kind of change that could put the administration in hot water with some people. Do you have any sense so far of what the rationale was behind the change?

TURNER: Yeah. An Education Department spokesperson told me, you know, our goal is to provide relief to as many eligible borrowers as quickly and easily as possible. And the department will continue to explore additional legally available options to provide relief to borrowers with privately owned FFEL loans. And, Juana, I think the tell in that statement is the words legally available. I have spoken with multiple legal experts who say this reversal was likely made out of concern that the private banks that manage these old FFEL loans could potentially claim financial harm and take the Biden administration to court.

SUMMERS: Cory, is that a legitimate concern? Are these lawsuits happening?

TURNER: Yeah, they have begun. Depending on how many borrowers consolidate, you know, these companies could see a lot of lost loans that they were planning on managing for years. In fact, just today, there was a new lawsuit filed by six state attorneys general, and it makes this very argument about one of these groups, called MOHELA. It's a loan servicer that manages both federal direct loans and these old (inaudible) loans. And in the legal complaint, they say letting borrowers consolidate to get debt relief, quote, "harms MOHELA by depriving it of the ongoing interest payments that those loans generate." And I think the department is worried that, you know, one of these banks or servicers could be granted legal standing in court and then ask the courts to freeze debt relief for everybody.

SUMMERS: Which would certainly be a big deal. OK, Cory, so the department is trying to dodge a lawsuit from one of these banks. But am I understanding you right that it's possible that the right lawsuit could just complicate debt relief for everybody?

TURNER: I mean, it's a possibility. And, you know, it's one that a lot of conservatives are actively exploring right now. They see Biden's debt relief plan as executive overreach. The big challenge for them is finding a plaintiff who can prove he will be harmed. We saw another lawsuit filed Tuesday by a borrower who said he didn't want to take a big state income tax hit on his relief. In response, the department said borrowers can opt out. Now we have today's move, likely trying to head off the claims of harm from some banks and loan servicers. Honestly, Juana, I think this is just beginning. I think, once we get the application from the Ed Department for debt relief, we'll probably see several more lawsuits.

SUMMERS: We'll check back in with you. NPR's Cory Turner. Thank you.

TURNER: You're welcome.

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