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Borrowers who have had student loan forgiveness eliminated describe “gut shock”

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“Emotionally, it’s like a punch in the gut,” says Chris Tasich.

Lisa Thackwell used the same language: “A big punch to the gut. It’s going to cut my debt in half,” Thackwell said of Biden’s promise in August to forgive her $10,000 loan debt. She and her husband plan to use the savings for their son’s education.

Instead, the Department of Education excluded many people from student loan forgiveness
Instead, the Department of Education excludes many from student loan forgiveness
But that was before the U.S. Department of Education quietly reversed itself last month, suddenly excluding hundreds of thousands of student loan borrowers, including Tasich and Thackwell, from Biden’s debt relief program – which it had told borrowers to qualify for only a few weeks earlier.

FFEL loans are federal loans, administered by private banks
Tasich and Thackwell have an old student loan called the Federal Family Education Loan or FFEL. FFELs were once the basis of the federal student loan program and were issued and administered by private banks or state lenders, but guaranteed by the U.S. government.

Today, most federal student loans are direct loans, but until 2010, direct loans were a major attractive adjunct to the FFEL program.

“We should always keep in mind that FFEL loans are federal loans, for that matter,” said Dominique Baker, a professor of education policy at Southern Methodist University.

To save money, the Obama administration shut down the FFEL program in 2010.

So began the advantages of federal direct loans. But more than a decade after the FFEL program ended, more than 4 million borrowers still hold these old loans held by banks and outside lenders. These are the very borrowers the Biden program is designed to help, Baker said, and promises “more breathing room for America’s working families.

“It’s pretty old debt,” Baker said. It also usually describes the characteristics of low-income borrowers.

That’s why President Biden told FFEL borrowers in August that they were eligible for debt relief. All they need to do is consolidate their old loans into new direct loans, according to the Department of Education website. These new loans would make them eligible for relief.

In just one month, the guidelines will change dramatically.

The Lawsuit That Dashed the Hopes of Many FFEL Borrowers
When Biden first announced his loan forgiveness plan, Jennifer Newell Davis began working on a plan.

“I was really counting on lower monthly payments to cover my mortgage,” says Davis, who has less than $6,000 in outstanding FFEL loans.

A deeper look at the legal battle to stop Biden student loan forgiveness
Then, in late September, several Republican state attorneys general sued Biden and the Department of Education, arguing that canceling these old FFEL loans would cause serious financial harm to the banks and outside lenders that still manage and profit from them – and calling on the courts to stop debt forgiveness for everyone. The day the lawsuit was filed, Sept. 29, the department quietly changed its rules to exclude FFEL borrowers who had not yet applied for consolidation loans.

Davis said she had been waiting for the department to officially release its debt relief application (which occurred Monday) before consolidating. “All the information I received was wait, we were told to wait, wait, wait. Then all of a sudden, the rug was pulled out from under us.”

“Honestly, I cried a little bit when I found out it might not be forgivable,” she said. “That’s when I started the petition.”

Davis is collecting signatures from other borrowers to show that such a reversal would hurt a lot of people. But she fears no one will care.

You can now apply for Biden’s student loan forgiveness program. That’s it.
“Republicans have not stepped up to help,” Davis said, noting that it was Republicans who brought these legal challenges, “but now it feels like Democrats are turning their backs on them.”

This feeling is due to the fact that the Department of Education changed its practices without officially announcing, explaining or acknowledging the whipping that borrowers were experiencing.

In fact, some FFEL borrowers told NPR that they did not expect debt relief when Biden announced his plan in August. Their frustration – and anger – now is due to the reversal itself: being told they were eligible, then five weeks later being told they weren’t, with no explanation.

At the time, the department offered only the following statement to NPR.

“Our goal is to provide relief to as many eligible borrowers as possible as quickly and easily as possible, which will allow us to achieve this goal while we continue to explore other legally available options for providing relief loans to borrowers with private FFEL loans and Perkins, including whether FFEL borrowers can consolidate without receive one-time debt relief without consolidation …… The FFEL program has now lapsed and only a small percentage of borrowers have FFEL loans.”

This change affects nearly 800,000 borrowers
That last sentence, about FFEL borrowers being “a small percentage,” becomes the sum total of the Biden administration’s strategy: downplay the reversal by minimizing the number of borrowers affected.

White House press secretary Karine Jean-Pierre told reporters, “The number of borrowers affected by this change is much smaller. I know [there are reports] of millions, but it’s actually much fewer.”

Compared to the more than 40 million borrowers who may qualify for debt relief, Jean-Pierre is correct. The excluded FFEL borrowers represent just 2 percent of the whole.

But that’s still less than 800,000 borrowers – enough to disillusion Yankee Stadium at least 14 times, according to the White House.

“It makes me angry. They just continue to say, ‘It’s a small group. It’s a small group. It’s a small group,'” FFEL borrower Kristasic said. “But this is a vulnerable group. They’ve held their debt longer than most people. And they’ve been marginalized.”

FFEL borrower Amy Rush said, “I’m really frustrated because some of us have been paying for 20 years and we’re considered a small amount that can be taken care of.” “I don’t know if other people are as frustrated as I am, but, you know, I hope we can fight back.”

FFEL borrowers have repeatedly been excluded from the benefits enjoyed by direct loan borrowers, even though the only real difference between them is when they receive their federal loans.


NPR Exclusive: Troubled Public Service Loan Forgiveness Program to Get Overhaul
For example, some of the controversy over borrowers’ failure to qualify for public service loan forgiveness (PSLF) stems from the types of loans they have. Qualified Direct Loans; FFELs do not, even though they were the mainstay of the federal student loan program at the time PSLF was created.

More recently, FFEL borrowers who still have loans held by outside lenders do not qualify for the pandemic suspension of interest and repayment if they do not convert to direct loans.

“In fact, over the last few decades, [FFEL borrowers] have always been borrowers thrown under the bus,” said Persis Yu, associate executive director of the Center for Student Borrower Protection. “They were excluded from the CARES Act. They’re excluded from PSLF. They’re excluded from more generous [income-driven repayment plans]. the way FFEL borrowers are seen as expendable is really tragic.”

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