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Biden Won’t Forgive Privately Held Federal Loans

Biden Won’t Forgive Privately Held Federal Loans
Katherine Knott
September 30, 2022
In a move that could affect millions of people, federal student loans not held by the U.S. Department of Education will no longer be eligible for debt relief, the department quietly announced Thursday.
When President Biden last month announced plans to forgive up to $20,000 in federal student loans for eligible Americans, the department didn’t definitively say whether privately held federal student loans would be included in the plan but said that it was discussing the issue with private lenders. Now, those borrowers have an answer: their loans will not be forgiven.
“ED is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED, including FFEL Program loans and Perkins Loans, and is discussing this with private lenders,” the department wrote in its updated FAQ about the debt-relief plan.
The department had encouraged borrowers with privately held federal student loans, including those with Federal Family Education and Perkins Loans, to apply for consolidation into the Direct Loan program, but now only those who applied for this process before Thursday will be eligible for loan forgiveness.
A department spokesman said in a statement to media outlets that the 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 … The FFEL program is now defunct and only a small percentage of borrowers have FFEL loans.”
More than four million borrowers have $108.8 billion in outstanding Federal Family Education Loans held by commercial lenders, according to federal data. About 9.38 million Americans have loans through this program over all. The Biden administration originally said about 43 million people would receive some relief under the plan, which would forgive up to $20,000 in student loans for eligible Americans. The application for debt relief is supposed to open next month.
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