The Department of Education (ED) recently started sending emails to federal student loan borrowers with at least one ED-held loan to provide information about potential student debt relief and their ability to opt out of receiving the relief. Borrowers who want to be included in the potential student debt relief do not need to take any action. This announcement provides information to institutions about how borrowers can opt out of the potential student debt relief and how to direct student or borrower questions if borrowers reach out to their institution.
Proposed Student Debt Relief
President Biden announced new plans to cancel student loan debt under the Higher Education Act through negotiated rulemaking. The new rules have not yet been finalized. If implemented as proposed, these rules will authorize partial or full student debt waivers under the following circumstances:
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Borrowers who owe more than they did at the start of repayment:
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The current balance on an unconsolidated Direct Loan, ED-held Federal Family Education Loan (FFEL) Program loan, or ED-held Perkins Loan is greater than the balance of that loan when it entered repayment.
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The current balance on a consolidation loan is greater than the balance of the loans included in a consolidation loan when the original loans entered repayment.
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Borrowers who first entered repayment many years ago:
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The borrower has only undergraduate loans, and at least one of those loans entered repayment before July 1, 2005. Or the borrower has at least one graduate loan, and at least one of their undergraduate or graduate loans entered repayment before July 1, 2000.
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Borrowers who are otherwise eligible for loan forgiveness but have not yet applied:
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The borrower has not enrolled in an income-driven repayment (IDR) plan but would be eligible for relief if enrolled. Or the borrower would be eligible for closed school discharge or other types of forgiveness opportunities but haven’t successfully applied for that relief.
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Borrowers who enrolled in low-financial-value programs:
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The borrower attended an institution that failed to provide sufficient financial value.
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The borrower attended an institution that failed one of ED’s accountability standards for institutions.
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Note that the final rules would likely apply only to borrowers with loans that have entered repayment.
Student Loan Debt Relief Opt-Out
ED began to send emails on Thursday, Aug. 1, 2024, informing borrowers with at least one ED-held loan about updates on potential student debt relief and to instruct them they have until Aug. 30, 2024, to contact each of their ED loan servicers and opt out if they do not want to receive this relief. It will take up to seven days to complete sending emails to the entire portfolio of borrowers with at least one ED-held loan. The email distribution included borrowers who have not yet entered repayment or are still enrolled at your institution, as those borrowers may have entered repayment by the time the new rules are published.
The rules that would provide this relief are not yet finalized, and the email does not guarantee that the specific borrowers will be eligible for relief. ED will provide additional information to borrowers once the rules are finalized this fall, but if a borrower opts out, they will not be able to opt back in. The opt-out also opts borrowers out of forgiveness under income-driven repayment (IDR) for the next several months.
This opt-out opportunity is only available to borrowers with ED-held federal student loans and does not apply to potential waivers that might be available to commercial FFEL borrowers or Perkins Loans held by institutions.
To learn more about student debt relief and what is currently proposed, please visit StudentAid.gov/debtrelief.
Student and Borrower Questions
Institutions may receive questions regarding student debt relief and the opt-out email from students and former students with federal student loans. The opt-out email instructs borrowers to not contact FFEL loan holders; however, we suspect that some borrowers may begin contacting their commercial FFEL loan holders or their institutions to opt-out of debt relief or to ask general questions.
To ensure that these borrower inquiries and requests are handled correctly, institutions should direct these borrowers to the servicers of their ED-held student loans to ensure that their opt-out requests are submitted by the August 30 deadline. This will also ensure that these borrowers receive correct information regarding the potential waivers from those loan servicers.
Because the proposed debt relief has not yet been finalized, students and borrowers should know that their servicer won’t be able to tell them if they are eligible for student debt relief.
Borrowers can also be directed to StudentAid.gov/debtrelief and the most recent announcement for more information.