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On Thursday, the Biden administration scaled back the eligibility requirements for the student loan forgiveness plan. Under the new terms, borrowers who have loans that were guaranteed by the federal government but held by private lenders will no longer be eligible for debt relief. The amended plan will impact around 800,000 people.

When Biden’s one-time student loan debt relief plan was launched earlier this month, The Department of Education initially told borrowers that loans under the Federal Family Education Loan program (FFEL) and Federal Perkins Loan program would be eligible for debt relief as long as the borrower consolidated their debt into the federal Direct Loan Program. However, on Thursday, officials from the department appeared to double back on that promise. Now, privately held federal student loans will only be eligible for relief if borrowers consolidated their debt before Sept. 29 and meet a certain income threshold. Currently, there are four million borrowers with Federal Family Education Loans.

In a statement to CNN, the Department of Education said it was “assessing whether there are alternative pathways” to provide relief for those affected.

“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 read.

“Borrowers with privately held federal student loans who applied to consolidate their loans into Direct Loans before Sept. 29, 2022, will obtain one-time debt relief,” the Department clarified. “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.”

The FFEL loan program was ended in 2010 under the Obama administration during an overhaul of the student loan program.

How Will The One-Time Student Loan Debt Relief Plan Work?

Under Biden’s one-time debt relief plan, individual borrowers who earned less than $125,000 in either 2020 or 2021 will be eligible to receive up to $10,000 in student loan forgiveness. Married couples or heads of households who made less than $250,000 annually in those years will also receive $10,000 in debt relief.

Borrowers who received a federal Pell grant while they were attending college will receive up to $20,000 of student loan forgiveness. Between 2020 and 2021, approximately 6.4 million students received a Pell grant. The grant is awarded to low-income students each year and determined by factors such as income, family size, and the educational costs associated with their college.

In October, eligible borrowers will be able to apply for the one-time student loan forgiveness plan online through the Department Of Education’s website.

Six Republican States Are suing Biden For  The Forgiveness Plan

Six Republican-led states are now suing the Biden administration to block the student loan debt relief plan from taking effect. The massive lawsuit was filed in federal court on Thursday in Missouri by several state attorney generals hailing from Iowa, Missouri, Arkansas, Kansas, Nebraska and South Carolina.

“In addition to being economically unwise and inherently unfair, the Biden Administration’s Mass Debt Cancellation is another example in a long line of unlawful regulatory actions. No statute permits President Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed,” Nebraska Attorney General Doug Peterson’s office said in a news release.

In the suit, the Republican representatives argued that Biden’s debt relief plan financially harms student loan servicers. One of those plaintiffs is the Missouri-based company MOHELA, which is one of the largest holders and servicers of student loans in the United States. The lawsuit states that if borrowers consolidated their FFEL loans owned by MOHELA into Direct Loans, they will deprive the company “of the ongoing revenue it earns from servicing those loans.”

According to NPR, Persis Yu of the Student Borrower Protection Center slammed GOP leaders for the suit.

“FFEL lenders have shown their true colors. Instead of working in the interest of student loan borrowers – their customers – these lenders are holding hostage relief to millions of borrowers in order to keep making a buck off of borrowers suffering,” Yu said.

Public Citizen, a nonprofit group fighting for systemic change, also criticized the right for filing the suit.

“BREAKING: Republicans are suing the Biden Administration to block student loan relief for millions of Americans. The GOP canceled $1,900,000,000,000 in taxes for rich people. But suddenly canceling student debt is a problem? Give us a break,” the organization tweeted on Thursday.


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