The U.S. Department of Education has changed its guidance around who qualifies for student debt relief.
Borrowers who took out federal loans through Perkins loans and Federal Family Education Loans are impacted by this. FFEL loans are issued and managed by private banks but guaranteed by the federal government
According to NPR, until Thursday the Student Aid website told those borrowers that they could consolidate those loans into federal Direct Loans and qualify for relief under the debt cancellation program.
Now the guidance now says, “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.”
In a statement to NPR, a department spokesperson said, “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. 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.”
NRP said legal experts told them that the reversal of policy was probably made out of concern that the private banks that manage old FFEL loans would file lawsuits to stop the debt relief.