Biden administration revises student loan forgiveness for some borrowers

The Biden administration reversed course on one aspect of its student debt forgiveness plan. (iStock)

The Department of Education changed its guidance about who qualifies for President Joe Biden’s student loan forgiveness plan.

At the end of August, Biden canceled $10,000 in student loan debt per borrower and $20,000 in student debt for those who used Pell Grants to attend college. The cancellation applies to all federal student loan borrowers making less than $125,000 per year, or $250,000 per year for married couples, according to the administration.

"In keeping with my campaign promise, my administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023," Biden said in a tweet.

However, late last week, the department amended how the plan pertained to borrowers with Perkins loans and Federal Family Education Loans (FFEL). Before 2010, when these programs were ended, borrowers were able to take out Perkins loans and Federal Family Education Loans (FFEL), which were guaranteed by the federal government but issued and managed by private banks. 

Guidance from the Department of Education had been that these borrowers could refinance their loans into a Direct loan in order to qualify for student loan forgiveness. However, the department's amendment said that was no longer the case.

"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," the Department’s guidelines stated. "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."

Borrowers who applied to consolidate their loans into the Direct Loan program before Sept. 29th will still qualify for loan forgiveness, the department said. Roughly 4.1 million federal borrowers have student loans held by private lenders, Politico reported, citing recent federal data.  

If you have private student loans that do not qualify for student loan forgiveness, you could consider refinancing your loans to a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.


State attorneys general file lawsuit about student debt relief plan

Six state attorneys general recently filed a lawsuit against the Biden administration and its mass student debt cancellation. 

Considering the Department of Education's original guidance for how borrowers with FFEL and Perkins loans could get student loan forgiveness, the lawsuit alleged that this instruction would cause borrowers to refinance their current loans en masse.

"The consolidation of MOHELA’s FFELP loans harms the entity by depriving it of an asset (the FFELP loans themselves) that it currently owns," the lawsuit stated. "The consolidation of MOHELA’s FFELP loans harms the entity by depriving it of the ongoing interest payments that those loans generate."

Since private student loan borrowers are not eligible for federal forgiveness plans, another way for them to potentially save money could be to refinance their loans. Borrowers can visit the Credible marketplace to compare multiple student loan lenders at once and choose the one with the best interest rate.


Biden administration kicks off student loan forgiveness process

The Biden administration released its first update on debt forgiveness last week, announcing that 8 million borrowers may be eligible for relief without applying or taking any further action, unless they choose to opt out. This is because the Department of Education already has access to the relevant data for these borrowers. 

For others, the department said it will launch a simple application in October for them to fill out. Borrowers will not need to upload documentation with their application, and if additional data is needed, the department said it will reach out to borrowers. 

Once the application is submitted, most borrowers can expect to see their debt forgiven within six weeks, according to the Department of Education. Because of this, the administration urged borrowers to apply by mid-November in order to receive their forgiveness before student debt payments begin again in January.

If you have private student loans that do not qualify for federal student debt forgiveness, a refinance could help you lower your monthly payments. To see if this is the right option for you, contact Credible to speak to a student loan expert and get all of your questions answered.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.