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Biden Admin Quietly Excludes 4 Million People From Student Loan Forgiveness Scheme

Neil Campbell
Neil lives in Canada and writes about society and politics.
Published: October 1, 2022
The Biden Administration quietly excluded 4 million existing student loan holders from its forgiveness scheme.
A staged photo opportunity in front of The White House after the Biden Administration announced it would forgive $10,000 in student loan debt for existing unpaid debtors only on Aug. 25, 2022. (Image: Paul Morigi/Getty Images for We the 45m)

In an abrupt about-face, the Biden administration has excluded as many as 4 million student loan holders from the controversial multi-billion dollar student loan forgiveness program.

Reported by publicly-funded state messaging outlet National Public Radio on Sept. 29, guidance published on the Department of Education’s website has quietly been updated to explicitly exclude a class of loan holders created from a federal program that ended in 2010.

NPR explains that Federal Family Education Loans (FFEL) and Perkins loans, which were guaranteed by the government but issued by private banks, are no longer eligible to qualify for the forgiveness package if they consolidate their loans into federal Direct Loans.


The outlet estimates four million people still have loans open under the previous era’s programs.

Based on screenshots in the article, DOE guidance was updated between the hours of 10:16 and 11:39 a.m. on Sept. 29 to explicitly state, in bold font, that as of that date “borrowers with student loans not held by ED [Education Department] cannot obtain one-time debt relief by consolidating those loans into Direct Loans.”

A spokesperson for the Administration paraphrased by NPR muddied the waters, stating that only 800,000 people — rather than 4 million — would be impacted because “many FFEL borrowers also have Direct Loans and so can still qualify to consolidate those FFEL loans.”

In a quoted statement, the spokesperson added, “We continue to explore additional legally-available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans, including whether FFEL borrowers could receive one-time debt relief without needing to consolidate.”

Despite the circular and optimistic jargon, the official nonetheless made it clear, however, that those who applied to consolidate into Direct Loans before Sept. 29 “will obtain one-time debt relief.”

Various legal experts were paraphrased by the outlet as explaining the DOE’s probable rationale, “The reversal in policy was likely made out of concern that the private banks that manage old FFEL loans could potentially file lawsuits to stop the debt relief, arguing that Biden’s plan would cause them financial harm.”

The reason being, once a borrower transforms their privately-held loan into a Direct Loan, the bank loses the opportunity to collect the interest owed on their contract.

Student loans do not qualify for bankruptcy protection.

A notable feature of the administration’s forgiveness plan is that it may saddle those it benefits with a significant tax burden.

This point is made clear in a lawsuit filed earlier this week by a public servant who argues that the apparent boon is an actual harm to him because his student loans would have been annulled tax-free under a public servant loan forgiveness benefit program he qualifies for.

In a Sept. 29 article published by The Daily Signal, GianCarlo Canaparo and Jack Fitzhenry, a senior legal fellow and a senior legal policy analyst for The Heritage Foundation, explain, “Under the law of the state where Garrison [the public servant] lives, his public interest loan forgiveness isn’t treated as taxable income.”

“But the forgiveness he would get under Biden’s plan would be treated as taxable income. So, the only thing that Garrison will get from Biden’s plan is a steep tax bill,” the duo continued.

The exclusion may be an even more bitter pill for some to swallow in light of a commonly held viewpoint among conservative voters that the forgiveness plan amounts to a carrot-on-a-stick to win Democrat Party votes in the November Midterm Elections.

Website Catholic Vote, for example, in an Aug. 24 article, described the plan as “stealing from the poor to give to the rich.”

The article posited, “Many critics pointed out on Wednesday who stands to benefit: the educated classes. The biggest winners would be recent graduates from good schools, while ordinary taxpayers – some of whom have already paid off large debts for themselves or their children, and others who have deliberately avoided student loan debts, would be relied on to help foot the bill.”

There may be broader political factors at work in the scaling back of the student debt exemption program, however.

Earlier in September, Vice President Kamala Harris stated during an interview with NBC that President Biden wanted Democrats to win an additional two Senate seats during the midterms so that the Filibuster Rule could be temporarily disposed of in order to codify Roe v Wade abortion legislation and push through Democrat-favoring federally mandated election laws.

And if that isn’t enough to convince detractors, Biden’s Twitter account stated the same as frankly as possible on Sept. 25, “Senator Lindsey Graham has proposed a national ban on abortion that would put criminal penalties on doctors.”

Biden’s account continued, “This November, if Republicans win control, they will vote for a nationwide ban on abortion. But if you give me two more Democrats in the Senate, I will codify Roe.”

And indeed, the move to exclude hundreds of thousands or millions of existing loan holders has struck a nerve with the left.

The World Socialist Website chided the Biden administration in an Oct. 1 article as making a “cave-in to the banks.”

The left was never much of a fan of the program in the first place, it would appear.

WSWS states, “Even if Biden’s plan were to go through in full effect, it would make only a small dent in the total student debt crisis. With $1.7 trillion in student debt, Biden’s plan to forgive $10,000 for those making under $125,000 a year will erase less than $400 billion over the next 10 years.”

The entity also lamented that the Education Department had estimated the cost of the program would be a staggering $300 billion over the course of the next 10 years, according to a rare opinion piece dissenting from the Biden Administration’s policy published in the Washington Post.

“Even the inflated annual cost estimates of right-wing think tanks, moreover, are less than what the United States government has shipped in weapons to Ukraine so far this year alone,” the WSWS quipped.

But on the other hand, $300 billion may be considered relative pocket change compared with the massive stimulus payments made since the beginning of the COVID-19 pandemic.

According to a recent report published by the Department of Labor’s Office, unemployment insurance programs have disbursed a stunning $872.5 billion has across the country between March of 2020 and April of 2022.

In addition, as much as $45.6 billion of that funding has been fraudulently laundered in the two-year period.