A couple of sentences on the Education Department's website were changed late last month. A group of student loan borrowers woke up to the fact that they no longer had the option to have their debt canceled.
The department pulled the rug out from under these people overnight. The department explicitly told them that they could sit tight and wait for instructions in order to qualify for up to $20,000 in loan balance reductions.
The borrowers who took out loans before the policy change have already been disappointed. Most other federal loan borrowers have benefited from it being excluded from generous repayment plans, debt cancellation for public servants and the two-and-a-half-year pandemic payment pause.
I have been trying to get a public apology from the White House and the Education Department. The government made a move in order to shield the debt cancellation effort from lawsuits and I didn't get one.
It's not surprising that this debacle is happening. These borrowers got their loans through the Federal Family Education Loan, and the debt for the ones in question resides at financial services entities that don't offer the borrowers the same benefits and privileges that others with federal student loan debt receive.
A parable for the larger federal student loan system is how relief keeps passing this group by. It can be difficult to manage student debt if you borrow from it.
The story begins in 2010 when the federal government changed its relationship with the banks. People who wanted to use federal loans would use the Direct Loan program. New federal loans remained on the government's books despite the fact that the government still hired loan servicers.
Who is eligible to have their loan canceled? If you are single and earn $125,000 or less, you will be eligible for the debt cancellation. If your income is less than $250,000 you can qualify if you are married and filing your taxes together. You could get an extra $10,000 in debt cancellation if you met the income requirements for the grant.
If I qualify, what should I do? Check with your loan servicer to make sure that your email address, phone number and postal address are listed correctly so that you can get guidance. Follow the directions. The Department of Education has a web page about who your servicer is.
I don't know how to prove that I'm qualified. If you have already submitted your most recent tax return to certify your income, you should not have to do anything else. Keep an eye out for your servicer's instructions. Everyone else will have an application process by the end of the year.
Payments for the outstanding balance will restart. Payments won't be due until at least January because of President Biden. If you don't get a billing notice at least three weeks before your first payment is due, you can contact your loan servicer to find out what you owe and when payment is due.
There was a separate and equal group of borrowers who didn't have direct loans. Since it can take decades to pay off student loan debt, they remained. Pre-2010 financial institutions kept those loans on their books.
FFEL borrowers weren't eligible for the more affordable student loan repayment plans because the government didn't control their debt
The Public Service Loan Forgiveness program excludes those with FFELs. When they called for help, customer service agents sometimes gave them incorrect information. It is too late for a lot of borrowers, but the Education Department is trying to fix it.
The FFEL borrowers were at a disadvantage during the Pandemic. Most federal student loan borrowers have been able to stop their payments since March 2020.
The same borrowers were disappointed again.
When I asked the Education Department in August about FFEL borrowers eligibility for the cancellation of up to $20,000 that it had offered to millions of other borrowers, a senior official said the FFEL borrowers could "sit tight" and not move.
Many people took advantage of the instant eligibility of consolidation. Some people found it beneficial to keep their FFEL loans where they were while waiting for further instructions.
The official made it clear that the Education Department wasn't making a recommendation about consolidation. The department wanted to make it possible for all FFEL borrowers to get relief even if they didn't consolidate their loans.
I wasn't the only one who received this message. The borrowers said their loan servicers told them the same thing. Betsy Mayotte, who runs the Institute of Student Loan Advisors, had been giving the same advice for decades.
Everything changed on the morning of September 29th. Only FFEL borrowers who had consolidated before that date were eligible for the new debt cancellation, according to the Education Department.
I received rage and despair in my inbox.
I asked Ms. Mayotte if it was the worst day of her career.
The department barely acknowledged the significance of the event. While we continue to explore additional legally available options to provide relief to borrowers, our goal is to provide relief to as many eligible borrowers as quickly and easily as possible.
It told the debtor that there are too few of them to really matter. Only a small percentage of borrowers have FFEL loans because the FFEL program is no longer active. Direct Loans is not the same program as this one.
It was important that the language was legal. Several lawsuits have been filed against the debt cancellation plan. A group of lawyers working for the government decided that the financial entities holding the old FFEL loans might have legal standing. They would lose out on interest income if a lot of FFEL borrowers moved their loans.
The next move was to remove any way that borrowers could cause harm. It is hard for anyone to accuse the federal government of causing economic harm by encouraging consolidation if they can't become eligible for loan cancellation through consolidation.
She told me in an email that she and other FFEL borrowers were being sacrificed for the greater good. Out of nowhere, hundreds of thousands of people lost out to help overcome legal scrutiny of a program that could help 40 million people.
It wasn't good to be a pawn on a board. Ms. Roe said she felt betrayed and insulted by the administration. Not being able to provide security and stability for my daughter is frightening.
The Public Service Loan Forgiveness program is one of the attempts the administration has made to right past student loan wrongs.
It's true that its actions here were defensive. It's possible to focus the mind by weeks of legal threats and lawsuits. In late August, it seemed reasonable for the Education Department to sit tight and facilitate the transfer of this particular debt in this particular context.
Republican state attorneys general are leading the legal charge against debt cancellation. Some states want to stop the federal government from giving relief to borrowers. People who live in those states can vote.
For borrowers who feel the federal government has left them behind, the situation isn't as bad as they think. The Education Department said it was still trying to find a solution for FFEL borrowers who didn't consolidate. It is not clear how that can happen while cancellation is the subject of lawsuits.
It is due to the recent progress that borrowers expect better from the people in charge. The people with FFEL loans deserve it.
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