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Home LATEST NEWS Student loan debt relief is reduced. Who is affected?

Student loan debt relief is reduced. Who is affected?

The Biden administration backed off its commitment to forgive up to $20,000 in federal student loans on Thursday, reducing the types of loans eligible for relief.

The basic outlines of the offer remain the same. Borrowers with incomes of less than $125,000 (or $250,000 for a couple) may qualify for up to $10,000 of debt forgiveness on their federal direct student loans. The relief amount increases to $20,000 for borrowers who meet the income limit and received a Pell Grant, a targeted form of aid for the most needy applicants, while they were college students.

What has changed is the treatment of loans guaranteed by the federal government but held by private lenders. This includes at least some of the loans issued through the Federal Family Education Loan, Federal Perkins Loan, and Health Education Assistance Loan programs.

Initially, the administration said qualified borrowers with these private loans could consolidate them into a federal direct loan and get debt relief. However, on Thursday, the department’s website said that to receive relief, borrowers had to have applied for a consolidation loan by September 29.

The Department of Education “is evaluating whether there are alternative avenues to provide relief to non-ED federal student loan borrowers, including FFEL Program loans and Perkins Loans, and is discussing this with private lenders.” says the website.

Some FFEL and Perkins loans are held by the Department of Education, so they remain eligible for blanket forgiveness if borrowers meet income limits. But for many older loans, borrowers may not know whether they’re federally or privately owned because their college didn’t give them a choice, said Abby Shafroth, director of the student loan borrower assistance project at National Law. of the Consumer. Center.

To find out if your FFEL or Perkins loans might qualify for forgiveness, go to your account on the Federal Student Aid site (StudentAid.gov) and access the “My Loan Servicers” list. If the servicer’s name is preceded by “DEPT OF ED”, that loan is held by the federal government.

According to the department’s latest statistics, 10.7 million people have outstanding FFEL and Perkins loans. More than 5 million of those loans are in the hands of the Department of Education.

Of the remaining loans, private but guaranteed by the federal government, only a portion of borrowers would meet the income limits for general loan forgiveness. An administration source told National Public Radio that approximately 800,000 people would be affected by the change in the policy of consolidated loans.

The change was reported on the same day that six Republican-controlled states blocked blanket debt relief, arguing the administration did not have the authority to pay off student loan balances. the lawsuit He contends the relief will hurt states because they operate or invest in lenders that make student loans.

By eliminating the ability to qualify for forgiveness by consolidating private FFEL, Perkins and HEAL loans into one direct loan, the administration is reducing future profit loss for lenders and service companies. However, that will not end the states’ lawsuit or an earlier challenge brought by the Pacific Legal Foundationwhich describes itself as a public interest libertarian law firm.

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