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Biden Scales Back Student Loan Forgiveness: How It Affects MD

Patch 10/1/2022 Deb Belt
Student loan borrowers stage a rally in front of The White House to celebrate President Biden cancelling student debt and to begin the fight to cancel any remaining debt on August 25, 2022 in Washington, D.C. © Photo by Paul Morigi/Getty Images for We the 45m Student loan borrowers stage a rally in front of The White House to celebrate President Biden cancelling student debt and to begin the fight to cancel any remaining debt on August 25, 2022 in Washington, D.C.

MARYLAND — The Biden administration quietly rescinded eligibility for student loan forgiveness from a portion of the borrower's promised relief. For Maryland's 837,600 residents paying back student debt, that means some won't get the forgiveness they expected.

Originally, the federal government planned to forgive $10,000 in student loan debt for borrowers making $125,000 or families earning $250,000 a year or less, along with an additional $10,000 for borrowers who received Pell Grants for college.

But the U.S. Department of Education quietly changed its guidance on who qualifies for the relief plan. The agency rescinded eligibility for borrowers with federal student loans owned by private entities.

The education department changed the language Thursday on its website to state, "As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans."

The policy change came as a group of six Republican attorneys general sued to block the loan forgiveness, arguing it's illegal and unconstitutional. Since the Biden administration announced the forgiveness plan last month, they also faced concerns over potential legal challenges from the student loan industry.

Student loan relief has represented a contentious issue leading up to midterm elections. Supporters of relief have argued that the student loan market would boost the economy and aid tens of millions who agreed to high-interest loans when they were young, along with reducing the racial wealth gap. Critics have stated that loan forgiveness shouldn't fall on the taxpayers.

The reversal will most significantly impact borrowers with Perkins loans and Federal Family Education Loans. Those loans, issued by private banks but guaranteed by the federal government, were the mainstay for federal student loans until the FFEL program ended in 2010.

More than 4 million borrowers around the nation still have commercially-held loans from the FFEL program, NPR reports. They represent a portion of the 45 million Americans who owe $1.75 trillion in student loan debt as of August, according to the Federal Reserve Bank of St. Louis.

The decision will directly impact about 800,000 borrowers, a Biden administration official told NPR.

It's not yet clear how many Marylanders the Biden administration's change of plans will impact.

Here’s a look at how student loan debt is affecting borrowers in Maryland, according to the Education Data Initiative:

  • 837,600 student borrowers live in Maryland.
  • The average debt per borrower is $42,861.
  • 13.6 percent of residents owe student loan debt.
  • 14 percent of the state’s indebted student loan borrowers owe less than $5,000.
  • 20.7 percent owe $20,000 to $40,000.
  • 3.2 percent owe more than $200,000.

The lawsuit — filed in federal court in Missouri — came from attorneys general in Missouri, Nebraska, Arkansas, Iowa, Kansas and South Carolina. The Student Borrower Protection Center spoke against the lawsuit.

"The student loan industry has made it painfully clear to the American people that they will stop at nothing to protect their profits," said Mike Pierce, the nonprofit's executive director. "For decades, borrowers, advocates, and law enforcement officials have raised the alarm on the student loan industry’s illegal and deceptive practices."

This story includes reporting by Patch Editor Josh Bakan.

The article Biden Scales Back Student Loan Forgiveness: How It Affects MD appeared first on Rockville Patch.

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