Are your student loans eligible for the White House forgiveness plan? What we know

It’s something more than 40 million Americans have in common: They hold federal student loans. But the lending system is famously complicated, and these loans come with various names and terms depending on when they were taken out and for what purpose.

What are usually just technical differences could now determine whether or not a borrower qualifies for President Joe Biden‘s new and unprecedented plan to forgive hundreds of billions of dollars in federal student debt.

Biden announced on Wednesday that most federal student loan borrowers will be eligible for some forgiveness: up to $10,000 if you didn’t receive a Pell Grant, which is a type of aid available to low-income undergraduate students, and up to $20,000 if you did. The relief is limited to individuals who make less than $125,000 per year, or married couples or heads of households earning less than $250,000.

Your loan type will also determine if you qualify.

Not sure what you have? On Studentaid.gov, you can check.

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Big picture, the vast majority – roughly 37 million borrowers – will be eligible for the forgiveness based on their loan type (and then as long as they also fall under the income cap), because their debt is under what’s called the William D. Ford Federal Direct Loan Program. That includes Direct Stafford Loans, and all Direct subsidized and unsubsidized federal student loans.

Under the Direct program, Parent Plus and Grad Loans, are also eligible for the relief, said higher education expert Mark Kantrowitz.

Then it gets more complicated.

As of now, the U.S. Department of Education is saying that loans qualify if they’re held by the department. You may be wondering: Aren’t all federal student loans held by the government?

Actually, no.

The federal government began lending to students on a large scale in the 1960s. Back then, though, it didn’t directly give out student loans. Instead, it guaranteed the debt provided by banks and nonprofit lenders, under what is now known as the Federal Family Education Loan (FFEL) program. That program was completely eliminated in 2010, after lawmakers argued that it would be cheaper and simpler to directly lend to students. Nearly 10 million people still hold FFEL loans, according to Kantrowitz.

Today, Kantrowitz said, “about half are held by the U.S. Department of Education and about half by commercial lenders.”

There are two reasons the government may now hold FFEL loans. When these loans go into default, the private companies that previously owned them transfer them over to a guarantee agency that services the debt on behalf of the federal government, Kantrowitz said. The other reason is that the government bought back some of the loans during the 2008 credit crisis.

Because much of the debt is still commercially held, and not with the Education Department, there’s concern that it won’t be included in Biden’s forgiveness. These loans also weren’t covered by the Covid pandemic-era payment pause on federal student loans, prompting criticism from advocates.

“The broad student loan forgiveness is available for the same loans as are eligible for the payment pause,” Kantrowitz said. “It does not include commercially held FFEL loans.”

Borrowers eager to know where their FFEL loans are held can go to Studentaid.gov and sign in with your FSA ID. Then go to the “My Aid” tab, and search for your loans. (At press time, access to the site was subject to long waits.)

Even if your FFEL loan is commercially held, all hope may not be lost.

A spokesperson for the U.S Department of Education said borrowers with those loans can call their servicer and consolidate them into the Direct Loan Program to become eligible for forgiveness.

There’s currently no deadline by which they need to do this, but presumably there will be one. As a result, experts recommend borrowers in this situation act quickly.

Another type of loan may also be excluded from forgiveness because it’s not in the government’s hands, Kantrowitz said: certain loans from the Federal Perkins Loan Program. Some of these loans are with the Education Department, but most are held by colleges.

If you pay your monthly loan bill to one of the government’s loan servicers, you should be able to get the forgiveness, Kantrowitz said, but if your payments are sent to another private lender, you’re probably out of luck.

All private student loans are also excluded.