- Kristopher Cabreira doesn't qualify for Biden's student-debt relief because he has FFEL loans.
- While FFEL loans initially qualified, Biden reversed the guidance on September 29.
Kristopher Cabreira was looking forward to the relief $10,000 in student-loan forgiveness would bring.
After President Joe Biden announced $10,000 in student-debt relief for federal borrowers making under $125,000 a year at the end of August, Cabreira, 46, immediately started thinking about what that reduction to his $43,000 balance would mean. He would be able to pay off his debt quicker with lower monthly payments, and it even could have given him the flexibility to financially assist his parents.
"I was ecstatic," Cabreira told Insider. "I immediately looked into it to see if I qualified, and it looked like I did."
But a decision the Education Department made on September 29 dashed all of his plans. Cabreira's student loans are federal loans managed by private banks within the Federal Family Education Loan (FFEL) program. While borrowers with those loans initially had the option to consolidate their debt into the direct federal loan, the September guidance stated that past that date, FFEL borrowers cannot consolidate, and therefore, will not be eligible for Biden's one-time student-debt relief.
Cabreira said he wasn't immediately aware of the reversal, but he found out a few days later when he called his student-loan company to confirm that he still qualified and was told that he was not eligible for debt relief.
"All of a sudden, it got yanked away," Cabreira said. "That could've been $10,000 I didn't have to pay, and now that's gone."
He's one of the 770,000 borrowers impacted by this decision, according to an administration official, and while the Education Department has said it will continue looking for other ways to help that group of FFEL borrowers, it adds on to the track record of FFEL borrowers being excluded from federal benefits just because they took out loans at the wrong time — before Congress officially shuttered the program in 2010.
"I feel stuck," Cabreira said. "There's no follow-up on us. All we hear is, 'well, we're working on it.' They should be doing more."
A lawsuit brought by 6 GOP states led to the reversal
Biden's student-loan forgiveness plan has been a target of criticism from conservative groups, and in late September, six Republican-led states filed a lawsuit arguing that the debt relief would hurt their states' tax revenues — along with the banks who could stand to profit from FFEL loans.
That's why the Education Department quietly implemented the reversal on FFEL guidance the same day that lawsuit was filed, effectively undermining a key argument in the Republicans' defense. But even without being able to use the loss of revenue from the FFEL program in their case, the same group is now responsible for the temporary halt the 8th Circuit Court of Appeals has placed on Biden's debt relief — meaning that for over two weeks now, the department has been prohibited from actually discharging any student loans until the court makes a final decision on the legality of the policy.
While that brings uncertainty for the millions of federal borrowers who have already applied for relief, the FFEL borrowers who didn't consolidate their loans before September 29 are left with an even murkier path forward.
"Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal while we continue to explore additional legally available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans," the Education Department said in a statement at the time.
One FFEL borrower even pursued legal action — on October 10, the Job Creators Network Foundation's Legal Action Fund filed a lawsuit seeking to block Biden's debt relief on behalf of two borrowers, one of whom has FFEL loans and isn't eligible for relief. The complaint said the borrower believed "it is irrational, arbitrary, and unfair to exclude her."
"When is the help actually going to come?"
Nearly five million borrowers still hold FFEL loans they took out decades ago. While the Biden administration has said that the reversal impacts only a small group of those borrowers because the majority of them either consolidated before the reversal or also have direct loans, its impact is still significant.
Currently making a five-figure income at a California vision insurance company, Cabreira's financial future is uncertain. Career-wise, he's not quite where he thought he would be due to job losses that threw him off track during the 2008 recession. While he's glad that he pursued his graduate school degree in business, he said he's "upset" he ended up in the FFEL program, which was the only way for him to finance his education.
"There's been no response from the Education Department, the White House, or even any Democrats," Cabreira said. "All they say is, 'oh yeah, we're so sorry that this happened to you. We're going to make this right.' Well, how are you going to make it right? When are you going to make it right? When is the help actually going to come? And of course, the Republicans are making it difficult for us that need this and want this."