Student loan debt relief is scaled back. Who’s affected?

The Biden administration backtracked on its commitment to forgive up to $20,000 on state student loans on Thursday, narrowing the types of loans eligible for relief.

The basic features of the offer remain the same. Borrowers with incomes of less than $125,000 (or $250,000 for a couple) may qualify for up to $10,000 in debt relief on their federal direct student loans. The relief amount increases to $20,000 for borrowers who meet the income threshold and received a Pell Grant — a form of aid to the neediest applicants — while in college.

What has changed is the treatment of loans guaranteed by the federal government but held by private lenders. This includes at least some of the loans made through the Federal Family Education Loan, Federal Perkins Loan, and Health Education Assistance Loan programs.

First, the administration said qualifying borrowers with these privately held loans could consolidate them into a federal direct loan and receive debt relief. However, on Thursday, the department’s website said borrowers must apply for a consolidation loan by Sept. 29 to receive relief.

The Department of Education “is evaluating alternative avenues to provide relief to borrowers on federal student loans not held by ED, including FFEL program loans and Perkins loans, and is discussing this with private lenders,” it said the site.

Some FFEL and Perkins loans are held by the Department of Education, so they remain eligible for a lump sum forgiveness if borrowers meet income limits. But for many older loans, borrowers may not know whether they are federal or privately held because they were given no choice by their college, said Abby Shafroth, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.

To find out if your FFEL or Perkins loans could be forgiven, go to your account on the Federal Student Aid website ( and go to the My Loan Servicers list. If the servicer’s name is preceded by “DEPT OF ED,” that loan is held by the federal government.

According to the ministry’s latest statistics, 10.7 million people have outstanding FFEL and Perkins loans. More than 5 million of these loans are held by the Department of Education.

Of the remaining privately held but government-guaranteed loans, only a portion of borrowers would meet the income limits for blanket forgiveness. An administration source told National Public Radio that around 800,000 people would be affected by the policy change regarding consolidated loans.

The change was reported on the same day that six Republican-controlled states blocked blanket debt relief, arguing that the government had no authority to wipe out student loan balances. The lawsuit alleges that the relief will hurt states because they operate or invest in lenders that make student loans.

By cutting off the ability to qualify for forgiveness through the consolidation of privately held FFELs, Perkins loans and HEALs into one direct loan, the administration reduces the loss of future profits for lenders and service businesses. However, that will not end the states’ lawsuit, nor will it end an earlier challenge by the Pacific Legal Foundation, which describes itself as a libertarian public interest law firm.

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