In a remarkable reversal that will affect the fortunes of millions of student loan borrowers, the U.S. Department of Education has quietly changed its guidance around who qualifies for President Biden’s sweeping student debt relief plan.

Multiple legal experts tell NPR the reversal in policy was likely made out of concern that the private banks that manage old FFEL loans could potentially file lawsuits to stop the debt relief, arguing that Biden’s plan would cause them financial harm.

When FFEL borrowers consolidate their old loans into federal Direct Loans, these private banks essentially lose business. If these banks’ financial health depends, at least in part, on the assumption that they would be holding and profiting from these debts over the long-term, then losing borrowers to Biden’s debt relief plan could, possibly, constitute harm.

In fact, a new lawsuit filed Thursday by six state attorneys general, makes this very argument. One of the plaintiffs, Missouri, is home to MOHELA, which manages both federal Direct Loans and these old FFEL program loans.

[My comment below — Ed]

Did they follow the APA in changing those rules? Nope, and that will play right into the existing lawsuits. https://t.co/QpZEmZmH7H

— Ed Morrissey (@EdMorrissey) September 29, 2022