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cancel student debt

Activists hold up signs calling for the cancellation of student debt at an August 25, 2022 rally outside the White House in Washington, D.C. (Photo: Craig Hudson for The Washington Post via Getty Images)

'Gut Punch': Biden Pulls Student Debt Relief for Millions as GOP States Sue

"The Biden administration told several million people they'd see their debt reduced by $10-20K, and a month later quietly wrote 'just kidding' on a website," said one affected borrower.

Brett Wilkins

Progressives on Thursday decried the Biden administration's decision to exclude millions of people from its student loan relief plan, a move meant to thwart legal challenges like the lawsuit filed on the same day by six Republican-led states seeking to block President Joe Biden's proposal to cancel up to $20,000 of federal educational debt per borrower.

"Republicans want to keep you in debt for the rest of your life and take away student debt cancellation."

Politico reports worries over legal challenges from the student lending industry prompted the U.S. Department of Education to reverse course and no longer allow borrowers with Federal Family Education Loan Program (FFEL) and Perkins loans—which are guaranteed by the federal government but held by private lenders—to participate in the debt cancellation plan.

Biden announced last month that his administration will forgive $10,000 in federal student loan debt for borrowers who attended college without Pell Grants and who earn less than $125,000 individually, or $250,000 as a household. Borrowers who received Pell Grants will have $20,000 in federal debt erased.

The president's approval rating bounced by double-digits among young voters in the weeks after his announcement, which fulfilled a campaign promise and came just over two months ahead of the 2022 midterm elections.

However, student loan debtors expressed deep disappointment over Thursday's move, with one borrower and activist calling the administration's about-face a "gut punch."

Another, journalist Dell Cameron, tweeted: "The Biden administration told several million people they'd see their debt reduced by $10-20K, and a month later quietly wrote 'just kidding' on a website. Where's the legal threat over that?"

The administration's reversal came as six Republican-led states filed a lawsuit in a Missouri federal court Thursday arguing that the president's debt relief plan is "not remotely tailored to address the effects of the pandemic on federal student loan borrowers," a legal requirement under the administration's justification for the cancellation.

According to The Washington Post:

The suit emphasizes that Missouri's student loan servicer, which is part of its state government, could see a drop in revenue because borrowers are likely to consolidate their loans under the Federal Family Education Loan program.

On Thursday, however, the administration said it would exclude FFEL from the loan forgiveness program... That change could help head off legal claims against the policy, although it will mean that roughly two million of the 44 million otherwise eligible borrowers will not qualify for relief.

Politico cites June federal data showing there were more than four million borrowers with $108.8 billion in privately held student loans.

"Republicans want to keep you in debt for the rest of your life and take away student debt cancellation," the Debt Collective, the nation's first debtors' union, tweeted in response to the suit. "It is an interesting strategy to adopt before the midterms."

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