Some federal student loans will no longer qualify for debt relief.
In a reversal of President Joe Biden’s original plan, the US Department of Education changed eligibility guidelines on Thursday, September 29, according to its website. Now, only federal loans held by the department will be eligible for student debt relief.
Some federal student loans, including Perkins loans and Federal Family Education Program (FFEL) loans, are held by private institutions and will no longer qualify for relief.
The department says it is “currently evaluating whether there are other avenues to provide relief to borrowers with federal student loans not held by ED, including FFEL program loans and Perkins loans, and discussing these with private lenders”.
However, if a borrower applies to consolidate their Perkins or FFEL loans by September 29, 2022, they will be eligible for one-time debt relief under the Direct Lending Scheme, the ministry says.
Here’s what you need to know about your eligibility for assistance.
What is a Perkins Loan
A Perkins loan is a low-interest federal student loan that is based on financial need, according to the Office of Federal Student Aid.
Perkins loans ended in 2017, but borrowers are still in debt on loans they took out years ago.
Unlike other federal loans, schools are the lenders of Perkins loans, which are subsidized by the federal government, which pays interest on the loans while the borrower is in school. Repayment generally begins for borrowers nine months after graduation or if they are enrolled as a student for less than half time.
There are certain circumstances in which a Perkins loan can be canceled or discharged.
Some teachers may have up to their entire loan forgiven depending on their work and length of service. Other civil service jobs are also eligible for cancellation. More information can be found here.
What is a loan from the FFEL program
Federal Family Education Program loans are private, bank-operated loans that are guaranteed by the federal government, according to NPR reports. FFEL loans were discontinued in 2010 and borrowers were encouraged to opt for the direct loan scheme instead.
Only a small percentage of borrowers still have FFEL loans, the department told McClatchy News.
Borrowers can still have these loans if they attended school before July 1, 2010, according to the Department of Education. FFEL program loans include programs such as Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and Consolidated Loans.
An administrator told NPR that the changes to eligible loans are expected to impact about 800,000 borrowers. Although federal data shows that 4 million borrowers hold commercial FFEL loans, many of these borrowers also hold direct loans and can still consolidate their FFEL loans.
When does the relief begin
The application for student loan relief is expected to open as early as October, which is next week.
After applying, borrowers should expect their relief to arrive in about six weeks, according to the department.