Listen carefully. Between the din of supporters cheering for the cancellation of some federal student loan debt and the clamor of conservative lawyers claiming that President Biden’s debt relief plan is completely unconstitutional, you can hear the frustration of trapped borrowers.
“Emotionally, it’s like a punch,” says Chris Tasich.
Lisa Thackwell uses the same language: “A punch in the stomach. That would have cut my debt in half,” Thackwell said of Biden’s promise in August to write off $10,000 of his loan debt. She and her husband planned to use the savings for their boys’ education.
But that was before the US Department of Education quietly turned around last month and suddenly barred hundreds of thousands of student borrowers, including Tasich and Thackwell, from Biden’s debt relief plan – the borrowers whom he had said, a few weeks earlier, might be eligible.
FFEL loans are federal loans, managed by private banks
Tasich and Thackwell have an older type of student loan, known as the Federal Family Education Loan, or FFEL. Once the foundation of the federal student loan program, FFELs were issued and operated by private banks or state lenders, but backed by the US government.
Today, most federal student loans are direct loans, but prior to 2010, direct loans were just a sideline to the main attraction of the FFEL program.
“We always have to remember that FFEL loans are federal loans, period,” says Dominique Baker, professor of educational policy at Southern Methodist University.
The Obama administration closed the FFEL program in 2010 in an effort to save money.
Thus began the ascendancy of direct federal lending. But more than a decade after the FFEL program ended, more than 4 million borrowers still have those old loans, held by outside banks and lenders. And Baker says those are precisely the borrowers Biden’s plan was meant to help, with his to promise to provide “more respite to working American families”.
“[FFEL] borrowers were more likely to attend community colleges, for-profits, and HBCUs. And that’s enough old debt,” says Baker. Characteristics that often also describe low-income borrowers.
That is why, in August, President Biden told FFEL borrowers that they could benefit from debt relief. All they had to do, according to the Ministry of Education website, was consolidate their old loans into new direct loans. These new loans would then qualify them for relief.
This focus would change drastically a month later.
The lawsuit that dashed the hopes of many FFEL borrowers
When Biden first announced his loan relief package, Jennifer Newell Davies started making plans.
“I was really planning on having that lower monthly payment to help with my mortgage,” says Davies, who has just under $6,000 in outstanding FFEL loans.
Then, in late September, several Republican state attorneys general sued Biden and the Department of Education, arguing that erasing these old FFEL loans would cause serious financial damage to the banks and outside lenders who still manage and profit from them. – and calling on the courts to stop debt relief for everything. On the day the complaint was filed, September 29the department quietly changed its rules to exclude FFEL borrowers who had not yet applied for loan consolidation.
Davies says she was waiting to consolidate until the department officially releases its request for debt relief (which happened on Monday). “The whole message I got was to wait, and we were told to wait, wait, wait. And then all of a sudden the rug ripped out from under us.”
“Honestly, I cried a little when I found out that it might not be forgiven,” she says. “And that’s where I started the petition.”
East Davies collect signatures from other borrowers making this reversal clear will hurt a lot of people. But she fears that no one cares.
“Republicans aren’t stepping in to help,” Davies says, pointing out that it’s Republicans who are filing these legal challenges, “but now it feels like the Democrats are turning their backs.”
He feels this way because the Ministry of Education rolled over without an official announcement, explanation or acknowledgment the whiplash borrowers were suffering.
In fact, some FFEL borrowers told NPR they did not expect debt relief when Biden announced his plan in August. Their frustration now – and their anger – is tied to the inversion itself: being told they are eligible, then five weeks later being told they are not, with no explanation.
At the time, all the department offered was this statement to NPR:
“Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, which will enable us to achieve this goal while continuing to explore other legally available options to provide relief to borrowers with private FFEL loans. and Perkins loans, including whether FFEL borrowers could get one-time debt relief without needing to consolidate… The FFEL program is now lapsed and only a small percentage of borrowers have FFEL loans.
The change affects nearly 800,000 borrowers
That last line, about FFEL borrowers representing a “small percentage,” became the sum of the Biden administration’s strategy: minimize the inversion by minimizing the number of borrowers involved.
White House press secretary Karine Jean-Pierre told reporters, “The number of borrowers impacted by this change is much smaller. I know there are [were reports of] a number of millions, but it’s actually much smaller.”
Compared to the more than 40 million borrowers who could potentially benefit from debt relief, Jean-Pierre is right. Excluded FFEL borrowers represent only 2% of the total.
But that’s still just under 800,000 borrowers, according to the White House — enough disillusioned people to fill Yankee Stadium at least 14 times.
“It makes me so angry. They just keep saying, ‘It’s a small group. It’s a small group. It’s a small group,” says FFEL borrower Chris Tasich. “But it’s a vulnerable group. They have been in debt longer than most. And they’ve always been marginalized.”
“I’m really upset that there are those of us who have been paying for 20 years, and we’re considered a small enough number to get rid of,” says FFEL borrower Amy Rush. “I don’t know if other people are as disappointed as I am, but, you know, hopefully we can defend ourselves.”
FFEL borrowers have repeatedly been excluded from the benefits enjoyed by direct loan borrowers, even though the only real difference between them is when they took out their federal loans.
For example, part of the controversy around borrowers not eligible for the Public Service Loan Relief (PSLF) stemmed from the kindly loans they had. Qualified Direct Loans; The FFELs did not, even though they were the workhorse of the federal student loan program when the PSLF was created.
More recently, FFEL borrowers whose loans were still held by outside lenders also could not qualify for the pandemic interest and repayment pause without switching to direct lending.
“Truly over the past few decades, [FFEL borrowers] are still the borrowers thrown under the bus,” says Persis Yu, deputy executive director of the Student Borrower Protection Center. “They were excluded from the CARES Act. They were expelled from the PSLF. They were excluded from the most generous [income-driven repayment plans]. It is truly tragic to see how FFEL borrowers have been treated as if they were expendables. »
A FFEL borrower lodges a complaint
Recent court documents offer the clearest explanation yet for why the Biden administration suddenly barred FFEL borrowers from debt relief.
On October 7, the Justice Department cited the FFEL rule change in its rebuttal of this lawsuit by several Republican attorneys general, arguing that since the department excluded FFEL borrowers from its debt relief plan , these FFEL lenders can no longer demonstrate damage.
Translation: The White House weeded out these borrowers to legally protect everyone else’s debt relief.
For the 98% of borrowers still eligible, this may seem like a worthwhile sacrifice.
For the 2% left behind, it’s very cold.
Also, while excluding FFEL borrowers may help the department deflect one lawsuit (the judge has yet to weigh in), it may have a different effect in another.
On October 10, the Legal Action Fund of the conservative Job Creators Network foundation filed a complaint on behalf of two plaintiffs, one of whom, Myra Brown, is herself an FFEL borrower who does not qualify for debt relief.
“If the Department grants debt forgiveness, Ms. Brown believes her student loan debt should also be forgiven,” the complaint states. “She thinks it’s irrational, arbitrary and unfair to exclude her.”
As a result, according to the plaintiffs, a judge should stop debt cancellation for all borrowers.