White House trims number of borrowers eligible for student loan forgiveness

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The move comes as some states challenge the program in court

Amid a court challenge to his plan to forgive some student loan debt, President Biden has tweaked his proposal, reducing the number of borrowers who will qualify.

In August Biden announced the U.S. Department of Education (ED) would forgive $10,000 in federal student loans. 

Included in that group of borrowers were those who held Federal Family Education Loans (FFEL), issued by private banks but guaranteed by the U.S. government. 

Under current terms, those loans cannot be consolidated. But when the loan forgiveness program was announced, the Department of Education said FFEL borrowers could consolidate their loans and qualify for debt relief.

Altered guidance

Now the administration has changed its guidance. In a statement on the ED website, officials said: “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."

"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," a spokesman for the Education Department told Reuters.

The move coincides with lawsuits filed in several states that challenge the legality of the president’s loan forgiveness program. The suits specifically challenge the provision that allows FFEL borrowers to consolidate their loans into federal Direct Loans, which are eligible for the program.

As of the last official count, about 4 million student loan borrowers hold FFEL loans. Of those, the administration estimates the change will affect about 770,000 people.

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