President Biden’s one-time student loan forgiveness program is unquestionably a win for federal student loan borrowers. However, because the administration waited until the last second, a critical mistake was made.
As a candidate, Joe Biden promised that policy decisions were going to be thought out and planned — he wasn’t going send out a tweet at 2 AM and leave federal officials scrambling to figure out what to do.
In the case of his one-time forgiveness announcement, Biden waited until the last second. This avoidable delay created a situation that hurt borrowers with FFELP student loans.
Sherpa Tip: FFELP borrowers got hurt the most by the hesitation, but servicers, taxpayers, and borrowers all were negatively impacted by waiting until the last possible moment.
How Biden’s Delay Hurt FFELP Borrowers
Leading up to the decision on one-time cancellation, there was a fierce debate in the White House about whether or not to forgive any debt. The day before the one-time forgiveness announcement became official, the Washington Post reported internal “feuding” over the $10,000 plan.
Making matters worse is the fact that the debate was about politics.
By waiting until the last second and only focusing on the political implications, significant issues of substance got overlooked.
When forgiveness was first announced, FFELP borrowers were told they could qualify for the program. When lawsuits were filed, officials scrambled and announced a critical FFELP deadline — the day after it had passed.
Lawsuits attempting to halt loan cancellation were inevitable. Had the administration spent more time ironing out the details of the program before announcing it, the abrupt changes wouldn’t have been necessary.
Lawyers for the Department of Education could have spent time evaluating the program and crafted rules in anticipation of potential lawsuits.
Making a Deal with FFELP Lenders
Had the internal debate not lasted until the day of the official announcement, administration officials could have worked out a deal with commercial FFELP lenders to prevent any lawsuits.
If the deals were in place before the official announcement, FFELP lenders wouldn’t have the legal standing to file lawsuits that endangered the entire one-time forgiveness program.
Unfortunately, this option wasn’t on the table.
Fixing FFELP Problems After the Fact
To the credit of the Biden Administration, efforts are ongoing to address the FFELP borrowers who were left out.
These negotiations could have been easier if they had happened before the official announcement.
Because the discussions are taking place after the fact, the Department of Education has no leverage. The FFELP lenders know the administration is desperate to make a deal.
If the discussions had happened before the announcement, negotiators could have said the FFELP forgiveness option was under consideration. A much smaller carrot conceivably could have gotten the deal done.
Options for FFELP Borrowers
For borrowers with privately-held FFELP loans, things are complicated. Issues are unresolved, and there isn’t an easy answer for what to do.
Ideally, sites like this one could tell borrowers the steps necessary to qualify. Alternatively, we could explain why they don’t qualify.
Instead, guidance for FFELP borrowers considering fixes like consolidation looks really complicated.
With some planning, this all could have been avoided.