Recent student loan reversals could affect thousands of Vermont borrowers

The Biden administration quietly changed the criteria for credit relief, which could affect more than 10,700 people who took out student loans through the Vermont Student Assistance Corporation. File photo by Glenn Russell/VTDigger

Updated at 7:15 p.m

On September 30, Hannah Regier called the Vermont Student Assistance Corporation, the state’s nonprofit lender, and asked for information about student loan relief.

The Athens artist and city official has been slowly repaying student loans since graduating from grad school in California 15 years ago, but she still has about $40,000 in student loan debt from the Vermont Student Assistance Corporation (VSAC).

Under President Joe Biden’s student loan relief plan announced by the administration Aug. 24, Regier believed she was eligible for up to $20,000 in loan forgiveness. But she was a day late.

A VSAC adviser told her that the day before, the Biden administration quietly changed the criteria for credit easing – meaning that governments appear to be ineligible.

“It really sucks,” Regier said in an interview. “I definitely used the F-word a few times with that poor advisor.”

Governor is not alone. The changes to the credit forgiveness criteria, which quietly went into effect late last month, mean an estimated 800,000 borrowers across the country are now ineligible for credit relief.

That number could include thousands of people who borrowed money in Vermont.

Late August Biden announced that student borrowers could be eligible for a one-time student loan relief of up to $10,000 or $20,000 depending on their eligibility for Pell Grants, which are government grants targeted at low-income students.

This assistance initially included borrowers who took out loans through the Federal Family Education Loan Program, often referred to as FFEL loans. FFEL loans were guaranteed by the federal government but originated from private lenders, including banks and nonprofit lenders such as the Vermont Student Assistance Corporation.

FFEL loans were discontinued in 2010. However, according to a, over 4 million borrowers still hold such loans National Public Radio report.

Among them are 10,741 people who have borrowed like governors through VSAC, according to Marilyn Cargill, the organization’s vice president of financial aid services, marketing and research.

Those 10,741 people include former Vermont residents who left the state for college and students who came from overseas to attend Vermont schools. About 37% of those borrowers currently have addresses in Vermont, Cargill said.

According to VSAC, these borrowers have approximately $250 million in total FFEL loan debt.

Before September 29, the federal government Student Support website told borrowers they could be eligible for debt relief on their FFEL loans by “consolidating” them into a current federal loan program, the Direct Loan Program.

That process involves filling out an online form, according to Cargill, after which the federal Department of Education is working to integrate those loans into its own debt portfolio.

But on September 29, the federal government quietly changed its eligibility criteria. Borrowers with these FFEL loans “cannot obtain one-time debt relief by consolidating these loans into direct loans,” the website now states.

Federal officials told NPR that the change would affect approximately 800,000 borrowers. But it’s unclear how many Vermonters this reversal will affect.

For one, high-income borrowers — those with annual incomes of $125,000 or more per person, or $250,000 for a household — are not eligible for debt relief.

Additionally, many borrowers have both FFEL loans and publicly held direct loans.

So if a borrower has $20,000 in direct federal loan debt in addition to FFEL debt, they could get the maximum amount of relief without even touching their FFEL loans.

But since the Biden administration’s policy change, Cargill said, VSAC “has been dealing with some students who are incredibly disappointed and really frustrated.”

Governor was one of those students. Paradoxically, because of those loans and the cost of private healthcare, she said it makes more sense to keep her income below a certain level in order to be eligible for cheaper repayment plans.

But without those loans, she said, she would be able to expand her fiber arts business and improve her credit rating.

“Having the credit sucks. It really does,” she said. “You’re just like a dead weight to me.”

Cargill said VSAC contacted the Vermont congressional delegation to help “ensure that FFEL borrowers regain their eligibility to participate in this program.”

In a joint statement, the Vermont congressional delegation said that “confusion, red tape or cynical legal attacks” should not deter FFEL borrowers from the federal loan forgiveness program.
“President Biden’s decision to reduce the outrageous level of student debt in our country is an important step in bringing real economic relief to millions of people in this country, including tens of thousands of Vermonters,” the statement said Attributed to Sens. Patrick Leahy, D-Vt., and Bernie Sanders, I-Vt., and Rep. Peter Welch, D-Vt. “No one should shoulder the burden of college debt just to get an education. As a delegation, we are committed to working together to ease the burden of student debt for every Vermonter.”

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