Banking

Four million borrowers are now being excluded from student loan forgiveness — here’s who is being removed and what you can do

After millions celebrated the announcement of federal student loan forgiveness, some are now having that excitement taken away from them.

In a change published Thursday, the Federal Student Aid website states that public student loans not held by the Department of Education such as Federal Family Education Loan (FFEL) or Perkins Loans aren’t eligible to receive one-time forgiveness.

Here’s what you need to know.

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Select student loan borrowers excluded from forgiveness

Up until today, those with FFEL and Perkins loans had the opportunity to consolidate their student loans into Direct Loans owned and serviced by the Department of Education. In an abrupt decision, those borrowers who didn’t consolidate may no longer be eligible for student loan forgiveness.

It’s likely this decision stems from two legal challenges filed in court against the Biden administration’s federal student loan forgiveness initiative. Both focus on one keyword: harm.

Both complaints, one from an individual citizen and another from a group of Republican states — both focus on the ‘harm’ they will receive from the widespread forgiveness. And this hasty decision seems to reflect the same theme.

FFEL and Perkins loans are slightly different than other federally backed student loans as these are owned by private banks, but guaranteed by the government. The banks earn revenue from servicing and maintaining those loans. So if the loans are forgiven, the banks will lose out on that income. And if this happens, legal experts suggest the banks could sue and claim they were ‘harmed’ by the student loan forgiveness initiative brought by the Biden administration.

The FFEL program ended in 2010, but still services about four million borrowers and holds about 7% of the total federal student debt portfolio, or roughly $113 million according to Federal Student Aid data.

What borrowers should do

SoFi Student Loan Refinancing

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans

  • Loan types

  • Variable rates (APR)

    From 2.49% (rates include a 0.25% autopay discount)

  • Fixed rates (APR)

    From 3.99% (rates include a 0.25% autopay discount)

  • Loan terms

  • Loan amounts

    From $5,000; over $10,000 for medical/dental residency loans

  • Minimum credit score

  • Minimum income

  • Allow for a co-signer

Education Loan Finance Student Loan Refinancing

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans, Parent PLUS loans

  • Loan types

  • Variable rates (APR)

    From 1.86% (rates include an autopay discount)

  • Fixed rates (APR)

    From 3.99% (rates include an autopay discount)

  • Loan terms

    From 5 to 20 years for student loan refinancing; 5, 7 or 10 years for parent loan refinancing

  • Loan amounts

  • Minimum credit score

  • Minimum income

  • Allow for a co-signer

Laurel Road Student Loan Refinancing

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency/fellowship loans, plus special pricing and reduced rates for health-care professionals (physicians, dentists, optometrists and physician assistants)

  • Loan types

  • Variable rates (APR)

    From 2.50% (rate includes 0.25% autopay discount and assumes no linked Laurel Road Checking discount)

  • Fixed rates (APR)

    From 3.99% (rate includes 0.25% autopay discount and assumes no linked Laurel Road Checking discount)

  • Loan terms

    5, 7, 10, 15, 20 years (but also offers any term below 20 years, subject to underwriting criteria)

  • Loan amounts

    For bachelor’s degrees and higher, minimum $5,000; for eligible associate degrees in the health-care field, up to $50,000 in loans for non-ParentPlus refinance loans

  • Minimum credit score

  • Minimum income

  • Allow for a co-signer

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.


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