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The Biden administration has scaled back its student debt relief programme as several Republican states filed lawsuits.
The US Department of Education on Thursday changed the language of the programme and said: “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 reversal implied that borrowers who have federal student loans that are owned by private entities will no longer be allowed relief under the programme.
Earlier the federal government said that those borrowers would have a path to receive up to $10,000 or $20,000 of loan forgiveness.
The change affects Federal Family Education loan (FFEL) borrowers — whose loans were issued and managed by private banks but guaranteed by the federal government — and does not allow them to consolidate their loans and qualify for debt relief.
Federal data shows that more than four million borrowers still have commercially held FFEL loans.
The change will impact 770,000 borrowers, according to an administration official, who did not want to be identified, reported Reuters.
It is not clear yet what led to the change in policy.
“Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal while we continue to explore additional legally available options to provide relief to borrowers with privately owned FFEL loans,” a spokesperson for the Education Department said.
The move came as six Republican states filed lawsuits against the programme on Thursday.
A lawsuit filed by the states of Nebraska, Arkansas, Iowa, Kansas, Missouri and South Carolina asked the court for an immediate temporary restraining order pausing the student debt relief programme.
A separate lawsuit was filed by the state of Arizona later on Thursday evening.
Also on Thursday, a lawsuit filed by the conservative group Pacific Legal Foundation to stop the president Joe Biden’s student loan cancellation plan was dismissed.
White House spokesperson Abdullah Hasan said the Biden administration is offering families “breathing room” while Republican officials from these six states “are standing with special interests”.
On Monday, the Congressional Budget Office (CBO) said the president’s plan to cancel some student loan debt will cost $400bn.
As of June 30, 43 million borrowers held $1.6tn in federal student loans.
CBO estimates show that about $430bn of that debt will be cancelled.
(Additional reporting by agencies)