According to a new guidance from the Department of Education, over 700,000 borrowers no longer qualify for the student loan relief from President Biden’s student loan forgiveness plan.  

In a surprising turn of events from previous announcements, borrowers who currently have federal student loans owned by private entities have lost access and are no longer eligible for student loan relief. 

The news came forward on September 29 and left thousands of people confused. On the U.S. Department of Education website, it was announced that the entity is currently working on a solution for these borrowers. 

Last August, the Bidren administration announced a loan forgiveness plan that would cancel up to $10,000 in student loans for anyone with an annual income equal or lower to $125,000. For married couples or heads of households, the annual income rule doubles it, at $250,000. Pell Grant recipients would also receive an additional $10,000 debt forgiveness.

So what does the new updated guidance mean for borrowers? 

Up until last Thursday, student loan borrowers who held private federal student loans still qualified for student loan relief. That is if they had their loans consolidated into the Direct Loan program. 

Now, according to the new guidance, borrowers with Perkins or FFEL loans that are not on the DL program cannot obtain student loan relief through consolidation. In that case, they’d only qualify for debt forgiveness had they applied for consolidation before September 29.

Michelle Dimino, who is the deputy director of education at Third Ways, said this development will affect a small portion of borrowers. According to the most recent data, approximately 4.1 million borrowers have over $108 billion in student loans held by private lenders. 

The new changes won’t impact all 4.1 million borrowers who have commercially held FFEL loans. That is because many also have a loan directly from the government that does qualify for relief. Plus, many others don’t meet the income requirements to participate. However, close to 800,000 student loan borrowers will be affected by this policy change.

The first step is to check whether you meet the income requirements. Verify your 2020 and 2021 tax returns. Financial education experts say that the Biden administration will most likely estimate your income from either one, or both, of those forms. 

But the most effective way to confirm whether or not you will suffer the impact of these changes is by contacting your loan servicer. Ask them which kind of loans you have and check the Department of Education’s website to see if you’re still eligible. 

The FFEL program ended over a decade ago. So if you took out a federal loan after 2010, there’s a big chance they’re held by the government. That means you’d still qualify for the student loan relief. 

Still unsure how the new student loan debt forgiveness program works? Follow the link below to learn everything you need to know about it.