Student loan borrowers with debt prior to going to prison can choose to consolidate their loans as a means to avoid defaulting on their debt, the U.S. Department of Education said on Tuesday.
The move will help borrowers tap into potential loan forgiveness plans—such as an income-driven repayment program like the Saving on a Valuable Education (SAVE) Plan—that have helped millions of Americans.
“Previously, this population of borrowers would have to rehabilitate their loans to get out of default rather than having the option to consolidate,” the Education Department said in a statement.
The move adds to the government’s policy to help student borrowers who are incarcerated. In 2023, the Education Department introduced new rules for the Prison Education Program (PEP), which gives inmates a chance to continue studying and secure funding through Pell grants and federal student loans.
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“While Second Chance Pell allowed more than 40,000 students to receive Pell grants, this mass expansion of federal financial aid will allow a far greater number of students to access federal Pell grants,” the government said in its statement.
“Through expanded access to Pell grants through PEPs, the Department has the potential to reach more than 760,000 incarcerated individuals. The Department anticipates approving at least 50 PEPs by 2025.”
The government said that it had been working with other federal authorities, like the Bureau of Prisons, to expand prison education programs to 47 states and Puerto Rico.
“Every person deserves the opportunity to become the best version of themselves, but too many individuals who are incarcerated never get that opportunity,” U.S. Education Secretary Miguel Cardona said in the statement. “By increasing access to repayment options for student loan borrowers who are incarcerated, the Department of Education is taking one important step to help them to reclaim their lives and rewrite their own narratives.”
The department pointed out that borrowers who plunged into default can suffer financially with poor credit scores that can hurt their economic prospects for the future.
The latest policy move can provide an avenue through which those with student debt can avoid such challenges.
“Prior to today’s announcement, borrowers who are incarcerated with loans other than Direct Loans had limited options to get out of default,” the Education Department said in its statement.
“Now, these borrowers will have an easier path to get out of default—stopping harmful credit reporting and improving future financial prospects—and return to repayment status during their incarceration.”
Newsweek contacted the Education Department for comment via email on Tuesday.
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