Biden ‘evaluates’ student loan forgiveness for some with private loans
- The Department of Education is determining whether to extend student debt relief to all FFEL borrowers.
- Borrowers with FFEL loans held by businesses can consolidate them into direct loans to receive relief.
- Private, non-federal loans will not qualify for student loan relief.
President Joe Biden’s student loan forgiveness plan may be the largest yet, but it still excludes millions of borrowers.
The majority of borrowers with federal student loans will be eligible to access Biden’s $10,000 to $20,000 relief if they earn less than $125,000 a year. This means that all borrowers with federally held loans – subsidized and unsubsidized loans, parent PLUS loans, graduate loans PLUS and loans in default – taken out before June 30, 2022, can apply in early October to reduce their balances.
However, the waters are a little murkier when it comes to the Federal Family Education Loan (FFEL) program. The FFEL program originally provided private loans guaranteed by the Ministry of Education. When the program ended in 2010, the department bought back some of the loans and they became federally owned. However, approximately 5000000 borrowers continue to have FFEL loans held by businesses, which means they are not eligible for federal relief.
According to a FAQs released by the department, it “evaluates whether to extend eligibility to borrowers with private federal student loans, including FFEL and Perkins loans.”
“In the meantime, borrowers with private federal student loans, such as the FFEL, Perkins, and HEAL programs, can take advantage of this relief by consolidating those loans into the Direct Lending Program,” the FAQ added. If consolidation is approved, these borrowers will be eligible for relief. The decision facing the ministry is whether or not to make all these borrowers automatically eligible without requiring consolidation.
Consolidation allows borrowers to combine federal loans they might be holding into one loan with a fixed interest rate, and the department says it’s a step borrowers can take if they want to qualify for a federal relief. Borrowers can apply to consolidate their debt into direct federal loans through this formbut the processing of the request can take more than a month and coincide with the deadline for requesting debt relief.
At this point, the ministry has yet to provide an update on whether it will expand eligibility for Biden’s relief to all FFEL borrowers. He also argued that borrowers who once had federal loans and consolidated them into private loans will not be eligible for the relief.
All other student loan borrowers who have federal loans likely won’t need to take any further action until October when it’s time to apply. They will have until December 31, 2023 to submit the form, and eight million borrowers will also be automatically eligible for loan forgiveness because the department has their tax information either through a FAFSA form or through requests for repayment plans. based on income.