On Thursday, the Department of Education scaled back President Joe Biden's federal student loan cancellation program to protect against legal challenges by six states, with new guidelines that excluded at least hundreds of thousands of borrowers initially told they qualified for the program.
The move excludes people who took out federal loans that, while they were guaranteed by the government, were technically handled by private banks.
ABC News' Senior National Policy Reporter Anne Flaherty spoke with "Start Here" Friday about the surprise move, what prompted it and how it will affect Americans with student loan debt.
START HERE: Anne, is it possible that the government pulls like a take-backsy? What is going on here?
ANNE FLAHERTY: You were asking if the president can do this and he can -- up until a point where a judge tells him he can't. So this is pretty much the story of every presidency. Two things we need to know. One, what he did was absolutely unprecedented. The student loan program has been ramping up since the Lyndon B. Johnson days. Basically, no president ever has looked at students and said, "Wait no, never mind. Let's just go ahead and not have you pay back this money. In a sense, a judge could look at this and say, "Hey wait, what are you doing?"
The other thing is he's relying on a lot of what was enacted after 9/11. This was a law that said the president can reduce or erase student loan debt during a national emergency. But he's also the same president who went on national television recently and said the pandemic is over. That's the Republican argument on this.
I don't think it's a coincidence that on the same day Republicans filed this lawsuit we also have the Education Department pull back on aspects of this plan. I think this is legal maneuvering to try and make this stick and try to make this work, because we've got an election coming up and he wants to keep this.
START HERE: So let's talk about these lawsuits first. I was asking everyone "Can Biden do this?" and everyone said, "Yeah, the Education Department has broad authority." Who is exactly filing the lawsuits and what are they challenging?
FLAHERTY: We've got six states that have filed their case in a federal court in St. Louis. All red states, all conservative, say, "Look, the president is saying the pandemic is over. What's the emergency here? You can't erase these loans." At the same time when you read this complaint in court, it reads like a political statement. It talks about the economy and how miserable it is. Why is the president giving a giant stimulus check only to people who went to college?
They say it's patently unfair. The White House is pushing back. They say we're going to fight this. They gave me a statement that said Republicans are working against the interests of middle-class and working-class families. So the next move is by the court.
START HERE: At this moment Anne, who is about to get their loans forgiven and who might not?
FLAHERTY: So everybody was supposed to get loan forgiveness up to a certain point. What's changed here is that we're talking about these federally backed loans that were guaranteed by the federal government but handled by private banks. So Republicans were saying people can be hurt by this move. It's the student loan servicers, servicers that are going to be put at a disadvantage.
START HERE: Private businesses essentially.
FLAHERTY: Right. And so the Education Department quietly changes the language on its website. Before they had said, well, if you can consolidate all these loans that are handled by private banks into these federal direct loans -- is what they call them -- that will qualify for relief. So then they change the website to say, if you have consolidated these loans by Sept. 29 into federal direct loans, then they will qualify.
START HERE: Wait, that was yesterday. They said, like, if you've done it by yesterday?
FLAHERTY: Yes, exactly. So it's a little bit of a wait, what? People are going to be waking up to that and saying, if you have those types of loans. So, you know, overall, the loan relief program is still there. A judge has not blocked it. People should keep moving forward, asking the government for relief on this. They should not stop. We don't know where this is going next. So TBD.