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Janae Pierre: Hey everybody, I'm Janae Pierre sitting in for Melissa Harris-Perry. At the end of August, President Joe Biden announced a long-awaited campaign promise.

President Joe Biden: My campaign for president, I made a commitment. I made a commitment that would provide student debt relief, and I'm honoring that commitment today. Using the authority Congress granted the Department of Education, we will forgive $10,000 in outstanding federal student loans.

Janae Pierre: This plan was aimed at middle and low-income borrowers and was estimated to provide relief for more than 40 million Americans who have federal student loans, but even before releasing the application to apply for this relief, the Biden administration scaled back provisions for borrowers who have federal student loans from private lenders. The administration says the changes will affect 770,000 borrowers.

Although some media reports placed the number much higher, and last week, six Republican Attorneys General filed a lawsuit against the Biden administration calling the loan forgiveness plan economically unwise, downright unfair, and unlawful. Here to talk about some of these changes is Cory Turner, Education correspondent for NPR. Cory, thanks for joining us on The Takeaway.

Cory Turner: Thanks for having me, Janae.

Janae Pierre: Last week, the Biden administration quietly scaled back some relief for privately owned loans. Can you tell us about these loans and how this decision affects these borrowers?

Cory Turner: Yes, so these are federal loans, but they're old. They're called FFEL loans. FFEL stands for Federal Family Education Loan, and these were basically the mainstay of the student loan program up until about 2010. When we're talking about these loans now, these are all essentially old debts, at least 12 years old. We know they're held by more vulnerable borrowers, typically, because the debts haven't yet been paid off.

Borrowers who are more likely to have gone to say, community college, for-profit college, historically Black college, or university. The challenge with these loans is that, unlike today's federal direct loans, these loans are held by commercial banks. They're guaranteed by the federal government, but they're held by commercial banks or other commercial lenders, or even some state-based agencies.

What happened essentially last week is while President Biden had said when first announcing this debt relief program in August that these borrowers could essentially just consolidate their old loans into new federal loans and then qualify for relief. Last week very quietly the language on the education department's website changed to say these borrowers, or at least many of them, hundreds of thousands at the very least, no longer qualify for relief, and there was really no explanation. The administration simply changed its position.

Janae Pierre: But Cory, why did the Biden Administration scale back this program in the first place?

Cory Turner: It didn't take very long honestly, this happened on Thursday. It didn't take very long to read between the lines and realize that the administration was quite fearful of legal exposure. Basically, these commercial lenders, these banks, and also these state-run agencies that also happen to manage and really profit from these old loans, they were worried that lawsuits were going to start coming their way arguing financial harm.

The argument was basically, look, if you let these old FFEL borrowers consolidate their loans and essentially erase them. Well, these commercial lenders and state-based investment entities, they're going to lose business and they're going to lose the profits that they would earn managing these loans for years to come. In fact, we saw a lawsuit filed by six states on the same day the administration changed this policy, arguing essentially that.

That one state-based entity called MOHELA, which is a pretty large federal student loan servicer, was going to suffer financial harm as a result of this FFEL decision. I don't think it's any coincidence that that lawsuit happened at essentially the same time the administration very quietly tried to change policy, presumably to protect itself from this legal strategy.

Janae Pierre: Is there a sense of the likelihood that President Biden's student loan forgiveness program will stand up in court?

Cory Turner: Janae, that is the question, and what we've seen over the past week is this really-- I've likened it to an awkward dance. Basically, you see a lawsuit filed that takes one legal strategy. There was a lawsuit early last week filed by a borrower who argued he would be automatically harmed because he was going to have to pay state income tax on his debt relief and he didn't want that or his debt relief because he was only a couple years away from public service loan forgiveness, which would've wiped out all of his debt.

What the administration did very quickly and very quietly, essentially, was to say, "Oh no, this debt relief will have an opt-out." All this borrower has to do is just let us know. Check the box here that says I don't want it, and a day or two later, the judge, in this case, said, "Well, as long as there's an opt-out you can't demonstrate harm," and so that legal strategy seems to have gone away, and now we have this lawsuit essentially representing these six states, and also this idea that the FFEL policy was going to hurt some of these commercial lenders.

We'll see if the Biden administrations move last week to exclude these FFEL borrowers, we'll see if that is enough to protect the broader debt relief plan from this legal strategy. I don't know and I've spoken with several lawyers who say, well, technically for the past six weeks FFEL borrowers have been able to consolidate their loans, and so these lenders can still demonstrate some financial harm. This decision last week doesn't undo those consolidations and those folks who will qualify. It's just moving forward. I don't know. I'm really curious to see how this plays out.

Janae Pierre: Same here. When can those who do qualify expect that the application process will go live?

Cory Turner: We have been told by the administration repeatedly that the application will come out in early October. Obviously, early October is here, so it could be in the next few days, we're not sure. I would assume that these lawsuits are making the administration think very carefully about how they craft the application. I spoke with one conservative group that says they're actually waiting to file their lawsuit until they have seen the application itself so that they can better craft their strategy to precisely what the administration is doing and how they plan to administer this relief.

Janae Pierre: Cory Turner is an educational correspondent for NPR. Cory, thanks so much for your time today.

Cory Turner: You're welcome.

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