The Department of Education on Thursday tightened eligibility criteria for President Joe Biden’s student loan forgiveness plan as GOP-led states sued to block the relief.
The department said those with privately owned federal student loans, including Federal Family Education Loans and Perkins Loans, can no longer apply for Biden’s student loan forgiveness, backtracking on a previous announcement that said those borrowers could consolidate their loans into federal Direct Loans to obtain relief money.
The change could impact up to 770,000 people, CNN reported, citing a Biden administration official.
Borrowers who acted before Thursday based on the government’s earlier guidance will still be eligible to receive the payment, the department said. The department added that it is exploring “alternative pathways to provide relief” to those borrowers and is negotiating with private lenders.
In August, Biden announced the government would forgive up to $10,000 per student loan borrower and up to $20,000 for Pell Grant recipients for those earning up to $125,000 annually. The White House also extended the freeze on student loan payments until January.
The change in eligibility criteria comes as the Biden administration faces a lawsuit from GOP-led states alleging the president lacks authority to saddle taxpayers with bills for those who choose to get a college education.
Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina on Thursday sued to halt the relief plan.
“The Department of Education is required, under the law, to collect the balance due on loans,” Arkansas Attorney General Leslie Rutledge told The Associated Press. “And President Biden does not have the authority to override that.”
White House spokesperson Abdullah Hassan accused the GOP officials involved in the lawsuit of “standing with special interests, and fighting to stop relief for borrowers buried under mountains of debt.”
Meanwhile, Frank Garrison, an Indiana-based lawyer working with Pacific Legal Foundation, a libertarian group in California, also filed a lawsuit to block Biden’s action. Garrison claimed he would “face immediate tax liability” as a result of the debt relief, according to Axios. Indiana is among the states planning to tax the student loan relief money, according to AP.
A judge on Thursday denied Garrison’s motion to pause the plan after the Justice Department clarified that the Education Department will allow those granted automatic debt relief to opt out.
The Congressional Budget Office has said the relief would cost up to $400 billion. But White House officials called that price tag “highly uncertain,” according to The New York Times. The CBO estimate for the first year of the program is lower than what the administration predicted, the White House added.