This afternoon, the Ministry of Education quietly changed the one-time discount policy for borrowers with loans from the FFEL scheme. The sudden change is a new blow for FFELP borrowers.
While the news is undeniably bad, all hope is not lost. Borrowers with corporate-held FFELP loans may still get $10,000 or $20,000 in loan forgiveness.
This article will explain what has changed, why it has changed, and what borrowers affected by the policy should do. Finally, I’ll cover the few nuggets of hope from an otherwise lousy day.
The policy change for FFELP borrowers
Prior to today, it was official Department of Education policy that private FFELP loans could be eligible for the unique Biden pardon program.
Under the new policy, these borrowers are not eligible for loan forgiveness and they have no path to forgiveness.
Here is a screenshot from yesterday:
Today, the language has changed as follows:
While there are many divisive aspects of the policy change, imposing a deadline without first announcing it seems particularly cruel.
A special note for federally held FFELP borrowers: If you have federally owned FFELP loans, this policy change does not apply to you. Borrowers with federally held FFELP loans remain eligible for up to $20,000 in loan forgiveness.
If you’re not sure if your loan is federally held, the easiest way to find out is to apply the payment suspension rules. During Covid relief, if you weren’t required to make payments or charge interest, your loan is federally held. If you had to make payments, your loan is private or commercial.
You can also check the status of your loan by access the database on studentaid.gov.
The explanation for the sudden change in policy
Today, six states filed a complaint challenge Biden’s one-time loan cancellation policy.
The lawsuit raised several arguments, but the one that led to today’s policy changes came from the state of Missouri, MOHELA’s home state. MOHELA was created by the Missouri Legislature in 1981 and operates as a quasi-governmental entity. Notably, MOHELA is also responsible for certain FFELP loans held by companies.
According to the complaint, “[t]he consolidation of MOHELA’s FFELP loans harms the entity by depriving it of the ongoing interest payments that these loans generate.
In other words, if borrowers consolidate their private FFELP loans, MOHELA loses money.
—
The importance of this detail goes back to the legal concept of upright. Anyone filing a lawsuit must meet specific requirements for the court to hear the case. If these conditions are not met, the case is dismissed.
When it comes to canceling a student loan, you can’t sue because you don’t like the law or think it’s a waste of money. Standing requires injury to the party suing. Some have argued that no party would have standing to challenge a one-time student loan forgiveness program.
If FFEL loans held by individuals are eligible for consolidation forgiveness, the State of Missouri has a very strong argument. If the lawsuit clears the standing requirement, a federal judge could block Biden’s entire pardon program — not just the FFELP pardon.
The Department of Education’s actions today are a desperate attempt to ensure a judge does not block Biden’s pardon program. It’s the legal equivalent of cutting off a limb to save the body.
Steps for FFELP Borrowers to Obtain Forgiveness
Unfortunately, there is no quick fix to this situation. You cannot go back in time and submit a request to consolidate yesterday.
The best bet for affected borrowers is to lobby the federal government. Go to studentaid.gov and file a complaint. Call your elected officials and let them know that you are unhappy with the change in FFEL policy.
The timing of the initial student loan cancellation announcement was clearly aimed at making voters happy ahead of the midterm elections. If people show their outrage at the reversal, it should inspire action.
At this time, negotiations are likely underway between the federal government and the FFEL loan managers. Ministry of Education lawyers must find a way to cancel FFEL loans without harming FFEL loan holders. The more pressure voters exert on their elected officials, the more likely it becomes that a deal will be struck to avoid trial.
Now is the time to raise your voice and be heard.
If all else fails, there is also the possibility that the sudden change in the rules could lead to a lawsuit by the borrower against the Department of Education. If that day comes, this article will be updated accordingly.
The hope of forgiveness FFEL
Today’s Ministry of Education statement makes it clear that they are trying to solve the FFEL problem:
Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, which will allow us to achieve this goal while continuing to explore other legally available options to relieve borrowers with FFEL loans and private Perkins loans. , including whether FFEL borrowers could benefit from one-time debt relief without the need to consolidate.
Without a doubt, this is a setback. However, there is still time for positive developments.
Additionally, the Biden administration’s track record is pretty good when it comes to helping FFELP borrowers. The Limited Waiver on PSLF allowed many civil servants benefiting from FFEL loans to obtain the credit they deserved. Also, new legislation help borrowers with FFELP spousal consolidation loans benefit from the IDR reimbursement and the PSLF.
Today’s developments are a clear sign that someone has dropped the ball. However, there is a history of problem solving for FFELP borrowers and a stated desire to solve this particular problem.
If FFELP borrowers make enough noise to be misled and excluded, it could inspire another solution.