Change to student debt forgiveness plan could disqualify some Idaho borrowers

A change to the fine print of President Joe Biden’s student debt forgiveness plan may mean fewer Idaho borrowers qualify for the relief the administration announced in August.

The change pertains to more than 4 million student borrowers nationwide, with Federal Family Education Loans issued and managed by private banks but ultimately backed by the federal government.

After a recent move by the U.S. Department of Education to change its guidance, NPR reports roughly 800,000 such borrowers will now be excluded from the student debt relief program. The Statesman reached out to the Department of Education for clarification of NPR’s numbers but did not get a response by the time of publication.

Randi Croyle, director of student financial aid services at the University of Idaho, told the Idaho Statesman that she thinks many Idahoans may have avoided being excluded from loan forgiveness, but it’s not a certainty.

Here’s what to know about the change, including how to check if your loans are now exempt from student debt forgiveness.

Which types of student loans are eligible for forgiveness?

Up until recently, the U.S. Department of Education advised borrowers with commercially held FFELP loans they could consolidate their loans into federal direct loans — the funds for which come not from private banks but the government.

Doing this would make these borrowers eligible for relief under Biden’s plan since the government owns the loans. But the department changed that language Sept. 29, tweaking the wording on the Department of Education’s website to say instead: “borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans.”

It’s not entirely clear why the Biden administration made this decision, but according to some legal experts, it’s a move to stave off lawsuits from banks who could make the case that the debt forgiveness plan has injured them.

Are Idaho student loan borrowers impacted?

The FFEL Program has been retired since 2010, and there haven’t been any new loans of the type since that time. Also, according to Croyle, the University of Idaho, which has an alum rate of 43% from Idaho, transitioned to the Direct Loan Program through the federal government in the 1990s.

“Most borrowers that borrowed back in the ’90s have probably paid off their loans, and it wouldn’t be much of an issue for the student,” Croyle said. “That being said, if they had consolidated their loans, most consolidation programs are through the Department of Education and under the DL program, so I don’t see it having much of an impact here.”

Those borrowers who consolidated their loans in federal Direct Loans before the change was made on Sept. 29 will still be eligible for forgiveness, depending on their income and other requirements laid out by the Biden administration’s plan.

Croyle added that she isn’t certain what type of loans other schools in Idaho use but that direct loans are the most commonly used nowadays. Boise State University, the state’s largest higher education institution, offers federally subsidized student loans directly from the U.S. Department of Education.

For those who do get caught up in the Biden administration’s change and are no longer eligible for student loan forgiveness, Croyle did offer other alternatives.

The Public Service Loan Forgiveness Program will forgive the remaining balance on your loans after making 120 qualifying monthly payments and working full time for a qualifying employer. There are also teacher and military loan forgiveness programs for those who qualify.

How can you tell if your student loans are held privately?

Borrowers can go online to studentaid.gov and log in to check on the status of their loans. If your loan does not show up on the federal site, it means that the loans are private.

You can also check via the National Student Loan Data System.