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Some student loans no longer eligible for forgiveness as Biden program faces legal challenges

Six Republican AGs sued the Biden administration over the loan forgiveness program

SHARE Some student loans no longer eligible for forgiveness as Biden program faces legal challenges
New graduates line up before the start of a community college commencement in East Rutherford, N.J.

New graduates line up before the start of a community college commencement in East Rutherford, N.J., on May 17, 2018. President Joe Biden’s student loan forgiveness program is facing legal challenges as well as changes to the eligibility rules.

Seth Wenig, Associated Press

Several million student loan borrowers will no longer have their loans forgiven after the Biden administration changed the eligibility rules for its loan forgiveness program. 

Borrowers with privately-held student loans — up to 4 million borrowers, according to NPR — will no longer be eligible for the forgiveness program, according to new guidelines on the U.S. Department of Education’s website. The administration backed off allowing private loan forgiveness over potential legal challenges by private lenders, according to Politico

The loans affected by the change were under the Federal Family Education Loan and Perkins Loans programs. Previous guidance said borrowers would be able to consolidate their loans in order to be eligible for loan forgiveness, but that appears to no longer be the case. 

Under the loan forgiveness program, all single borrowers who earn less than $125,000 a year can have up to $20,000 in student loan debt forgiven (and married borrowers with combined incomes of up to $250,000). 

News of the change comes as six Republican state attorneys general announced they were suing the Biden administration over the program. 

The legal challenge, filed in federal court in Missouri, is being pursued by attorneys general in Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina. They have asked the court to issue a temporary restraining order against the program, which would prevent borrowers from applying for debt relief in early October as planned. 

“In addition to being economically unwise and inherently unfair, the Biden Administration’s Mass Debt Cancellation is another example in a long line of unlawful regulatory actions,” a press release issued by Nebraska Attorney General Doug Peterson said. “No statute permits President (Joe) Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed.” 

The press release goes on to criticize the Biden administration for basing the debt forgiveness program on a 2003 law, the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act), that was meant to help veterans in the wake of the War on Terror. 

Biden’s student loan forgiveness program is also facing a legal challenge from a public interest law firm, which has filed a lawsuit in District Court on behalf of one of its attorneys, who claims he will face a state tax bill because of the program. 

Pacific Legal Foundation also filed a temporary restraining order that would block the loan forgiveness program until legal challenges play out. 

The employee, Frank Garrison, was already eligible for student loan relief under the Public Service Loan Forgiveness program. Under this program, borrowers who work for a nonprofit can have their student loans forgiven after 10 years of payments, and borrowers would not have a tax bill. But Garrison, who lives in Indiana, would face a state tax bill under Biden’s loan forgiveness program.