(Bloomberg) — The Biden administration on Thursday reversed course on part of its student debt forgiveness plan and will no longer forgive privately held federal student loans, according to an update to a Department of Education fact sheet.
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The change will apply to some borrowers with Federal Family Education Loans or Federal Perkins Loan Program loans, programs that Department of Education sunsetted in recent years. Some 10 million borrowers still hold a collective $248 billion in FFEL debt, even though the program stopped administering loans in 2010. An estimated 2 million people still hold about $6 billion from the Perkins loan program, which closed in 2017.
Previously, borrowers with these loans could apply to have them consolidated to qualify for up to $20,000 in loan forgiveness under the Biden administration plan.
Now, however, “borrowers with federal student loans not held by [Education Department] cannot obtain one-time debt relief by consolidating those loans into Direct Loans,” the Department of Education website notes. The change does not apply to borrowers who had asked to consolidate their loans prior to Sept. 29.
A spokesperson from the Department of Education said the update would allow the administration to provide relief to as many borrowers as quickly as possible while exploring legal options for FFEL and Perkins loans holders.
Also on Thursday, six Republican controlled states filed a lawsuit against the Biden administration’s student loan forgiveness plan. The administration is also facing a lawsuit from an Indiana attorney who says the plan will cause him financial harm because he has to pay taxes on the debt. (The Justice Department clarified that anyone who wants to opt out can do so.)
“The President and his Administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in January,” Abdullah Hasan, a White House spokesperson, said in a previous statement to Bloomberg News.
The White House on Thursday also released guidance for borrowers who are waiting to apply for student debt forgiveness in October. Borrowers will not need to upload any additional documentation, per a Twitter thread, and they will have until December 2023 to apply for relief.
Read more: A step-by-step guide to getting student loan forgiveness
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