In a reversal, new guidelines published to the department’s website say that as of Thursday, borrowers with federal student loans not held by the Education Department “cannot obtain one-time debt relief by consolidating those loans into Direct Loans.”
Before the revision, the Education Department had said borrowers who consolidated privately held federal student debt into direct loans could qualify for forgiveness.
It was not immediately clear how many borrowers the change will affect. NBC News has asked the Education Department for comment.
The unannounced change came the same day officials from six Republican-led states sued to block the Biden administration from going forward with its student loan debt relief plan.
The nonpartisan Congressional Budget Office released an estimate this week saying Biden’s plan to forgive $10,000 in federal student debt for many borrowers would cost the government about $400 billion, fueling further criticism of the proposal by Republicans just weeks before the November midterm elections. An estimate from the Education Department on Thursday put the cost at an average of $30 billion annually over the next decade and $379 billion over the life of the program, which it said would last more than three decades.
Biden in August announced his student loan debt relief plan, in which borrowers earning less than $125,000 a year, or $250,000 for couples who file taxes jointly, would be eligible for up to $10,000 in debt cancellation. Pell Grant recipients, who make up the majority of borrowers, would be eligible for an additional $10,000 in debt relief. The overall plan is expected to help more than 40 million borrowers.
After Biden revealed his plan, guidance on the Education Department website said officials were assessing whether the relief would extend to borrowers with privately owned federal student loans, including Federal Family Education Loans and Perkins Loans, and that “in the meantime, borrowers with privately held federal student loans can receive this relief by consolidating these loans into the Direct Loan program.” No immediate deadline for consolidating was specified.
On Thursday, however, the website said that only borrowers who had applied for consolidation of family education loans or Perkins loans into the direct loan program “prior to Sept. 29, 2022,” would be eligible for debt relief.
There still is no date for when a government website will be live for all eligible borrowers to file claims.