WASHINGTON–Attorneys general in seven Republican-led states have filed lawsuits over the Biden Administration plan to forgive some federal student loan debt.
The lawsuits resulted in the administration changing its guidance on who qualifies for federal student loan forgiveness.
As CUToday.info reported, earlier President Biden said the U.S. government will forgive $10,000 in student loans for millions of former college students holding federal student loan debt.
Now, the Department of Education has made an announcement that affects Federal Family Education loan (FFEL) borrowers - whose loans were issued and managed by private banks but guaranteed by the federal government - and does not allow them to consolidate their loans and qualify for debt relief.
Earlier, the department's website advised these borrowers that they could consolidate these loans into federal direct loans and qualify for relief. But now the department has changed the language to read, "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."
Four-Million Borrowers
According to federal data, more than four-million borrowers still have commercially held FFEL loans. An administration official, who declined to be identified, said the change impacts 770,000 borrowers, according to Reuters.
“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,” said a Department of Education spokesperson.
Betsy Mayotte, president of the Institute of Student Loan Advisors, told Reuters the updated guidance is "a gut punch, to say the least."
The Plaintiffs
Attorneys general in Nebraska, Arkansas, Iowa, Kansas, Missouri and South Carolina have asked the court for an immediate temporary restraining order pausing the student debt relief program. The state of Arizona has filed a separate lawsuit.
The lawsuit argues that when FFEL borrowers consolidate their old loans into federal direct loans, private banks essentially lose business.
The Congressional Budget Office (CBO) said Biden's plan to cancel some student loan debt will cost $400 billion.
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