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Amid GOP Legal Challenges, ED Begins Email Outreach to Borrowers on Student Loan Cancellation

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The Department of Education (ED) on Thursday provided student loan borrowers with an update to the administration’s student debt relief plans and formally outlined upcoming steps that will accompany the rollout of the application for loan cancellation.

In the update to borrowers ED provided further information concerning the parameters of the program and committed to sending weekly updates as more information becomes available.

The email reiterates that the administration will cancel $10,000 in student loan debt for millions of borrowers and up to $20,000 for Pell Grant recipients so long as the borrower meets certain income thresholds; for single borrowers making less than $125,000 and households making less than $250,000 in either 2020 or 2021.

ED reiterated that it will launch a “short online application” for the relief in October and that the application period will remain open until December of 2023.

If a borrower wants to be notified when the application is open they should sign up for notifications at the ED subscription page. For more information, borrowers should also consult a recently updated FAQ page developed by ED.

The FAQ page also includes a change in stance  on whether privately-held Federal Family Education Loan (FFEL) Program loans or Perkins loans are eligible for forgiveness.

"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," ED writes. “Borrowers with FFEL Program loans and Perkins Loans not held by ED who have applied to consolidate into the Direct Loan program prior to Sept. 29, 2022, are eligible for one-time debt relief through the Direct Loan program.”

According to the department’s guidance, ED is looking for alternative pathways to provide relief to these borrowers. Reports have indicated that the reversal from ED was made due to concerns about a legal challenge to its previous position.

For more information on this updated guidance, see the latest updates from our AskRegs team.

While ED continues its rollout of the cancellation, conservative groups, congressional Republicans, and GOP state officials are ramping up their efforts to formulate a legal challenge to prevent the administration from carrying out the relief.

Earlier in the week a nonprofit legal organization alleged that an Indianna based resident would be financially harmed by the administration’s action, and on Thursday six Republican-led states argued that the plan oversteps the administration’s executive authority.

As all of these actions continue to shape the future of the student loan portfolio, ED also underscored the importance of borrowers being made aware of debt relief scams and to ensure that borrowers only work with their servicer or ED when it comes to managing their loans.

 

Publication Date: 9/30/2022


David S | 9/30/2022 11:29:08 AM

This reversal on FFEL and Perkins loans being eligible through consolidation is a nightmare. Most borrowers know they have one or more student loans; they don't know the difference between DL and FFEL and Perkins, and those who did were confident that consolidation could help them get forgiveness. And the "nobody told me" complaints aren't going to be directed at the Department of Ed, they'll be directed at us. If the federally-held FFEL exception had to be made on legal grounds, how did the administration not figure that out months ago?

As for the lawsuit...well, seems one party wants to help students, one party wants to stop them from doing it. I'm no lawyer, but "if you forgive part of my loan, I won't get 100% of it back because I'll owe state taxes in my low-tax state" doesn't sound like it meets the legal definition of "harm" to me. Can I sue my employer because taxes prevent me from receiving 100% of my pay?

Eileen E | 9/30/2022 11:22:59 AM

Was this advertised to loan borrowers over the last month? "Borrowers with FFEL Program loans and Perkins Loans not held by ED who have applied to consolidate into the Direct Loan program prior to Sept. 29, 2022, are eligible for one-time debt relief through the Direct Loan program." I feel like we are going to have the same issues as the PSLF program.

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