Recent student loan reversal could affect thousands of Vermont borrowers

Updated at 7:15 p.m.

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

The artist and Athens city official has been slowly paying off her student loans since finishing college in California 15 years ago, but she still has about $40,000 in student debt with Vermont Student Assistance Corporation, or VSAC.

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

A VSAC adviser informed her that the previous day the Biden administration had quietly changed the criteria for loan relief — meaning Regier was apparently no longer eligible.

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

Regier is not alone. Changes to loan forgiveness criteria – quietly enacted late last month – mean around 800,000 borrowers across the country are now no longer eligible for loan relief.

This figure could include thousands of people who have borrowed money in Vermont.

In late August, Biden announced that student borrowers could be eligible for up to $10,000 or $20,000 in one-time student loan relief, depending on their eligibility for Pell Grants, which is federal aid for low-income students. .

This assistance initially included borrowers who took out loans under the federal Family Education Loans program, often referred to as FFEL loans. FFEL loans were guaranteed by the federal government but lent by private lenders, including banks and nonprofit lenders like the Vermont Student Assistance Corporation.

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

That includes 10,741 people who, like Regier, borrowed through VSAC, according to Marilyn Cargill, the organization’s vice president for financial aid services, marketing and research.

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

These borrowers have a total of about $250 million in FFEL loan debt, according to VSAC.

Prior to September 29, the federal government’s student aid website told borrowers they could become eligible for debt relief on their FFEL loans by “consolidating” them into a current federal loan program, the direct loans.

This process involves filling out an online form, according to Cargill, after which the federal Department of Education works to integrate these 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 says.

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

For one, high-income borrowers — those with an annual income 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 direct loans held by the public.

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

But since the Biden administration changed guidelines, Cargill said, VSAC “has been dealing with students who are incredibly disappointed and really frustrated.”

Regier was one such student. Because of these loans and the cost of private health care, she said, it paradoxically makes more sense to keep one’s income below certain levels to remain eligible for more favorable repayment plans.

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

“It sucks having loans. It really does,” she said. “They’re just kind of like dead weight on me.”

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

In a joint statement, Vermont’s congressional delegation said “confusion, bureaucracy, or cynical legal attacks” should not keep FFEL borrowers out of 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,” it read. in the statement, which was attributed to Sens. Patrick Leahy, D-Vt., and Bernie Sanders, I-Vt., and Rep. Peter Welch, D-Vt. “No one should bear the burden of student debt just to get an education. As a delegation, we are committed to working together to help ease the burden of student debt for every Vermonter.