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Media Press Releases Incarcerated Borrowers Finally Able to Consolidate Student Loans Following 32-Year Ban

Incarcerated Borrowers Finally Able to Consolidate Student Loans Following 32-Year Ban

New Policy Could Allow Hundreds of Thousands to Receive Second Chance Pell Grants, But Advocates Warn That Barriers Remain

April 16, 2024 | WASHINGTON, D.C. — Today, the Biden Administration announced revised guidance, overturning a 32-year-old policy prohibiting incarcerated student loan borrowers from consolidating their student loans. The policy announcement comes as part of Second Chance Month and will provide a much-needed economic pathway for hundreds of thousands of incarcerated borrowers to get back on track with their student debt and continue their dreams of a higher education.

“Today’s announcement begins to undo decades of needless policy harm inflicted upon incarcerated student loan borrowers. Research has shown that collecting on incarcerated borrowers yields minimal returns for the federal government, but inflicts maximum harm for these vulnerable borrowers,” said SBPC Counsel Khandice Lofton. “This revised guidance will provide a pathway for hundreds of thousands of borrowers to get back on track with their student debt, continue their higher education, and make the promise of a Second Chance Pell Grant real. We encourage the Biden Administration to find ways to automate this new benefit whenever, and wherever possible, as quickly as possible.”

This announcement builds on the Biden Administration’s efforts to allow borrowers opportunities to exit default, such as its limited-time “Fresh Start” initiative. Advocates have warned that administrative barriers to these programs threaten to derail their success. During the ED’s negotiated rulemaking on student debt cancellation, advocates and negotiators raised concerns about incarcerated borrowers’ ability to contact their student loan servicing companies or make payments to stay on track. These barriers include limited email and computer access, inability to call student loan servicing companies due to pre-approved call lists, time restrictions on phone calls, the high cost of communicating (both calls and stamps), and internet black-lists that often include the websites of student loan servicing companies. And the situation remains bleak for defaulted borrowers, even for those in more ideal situations. Among the 7.7 million borrowers who were in default at the start of COVID-19 pandemic on student loans that the federal government manages, ED’s latest data show that more than 80 percent are still in default.


Advocates and researchers estimate there are likely 200,000-250,000 incarcerated individuals with student loans. The Student Borrower Protection Center (SBPC) filed a lawsuit against ED for failing to respond to a 2021 Freedom of Information Act (FOIA) requesting documents and data pertaining to ED’s guidance and policies related to incarcerated borrowers. This lawsuit is ongoing as SBPC continues to push for ED to provide incarcerated borrowers with all the information they rightfully deserve. In 2023, the SBPC conducted the first empirical study into incarcerated student loan borrowers and found that 100 percent of the borrowers in the case study were in default on their federal student loans, despite roughly two-thirds of the incarcerated borrowers owing less than $5,000. Student loan borrowers who have defaulted on their loans become ineligible for Pell Grants, including the Second Chance Pell Grant, making today’s revised policy vital to the financial well-being of incarcerated individuals hoping to participate in a prison education program. One such borrower is Amanda Newman.

Amanda was held at Women’s Huron Valley Correctional Facility in Ypsilanti, Michigan. The facility offers an associate degree program, which could have been an opportunity for her to complete her studies, and she was eager to do so. However, due to her defaulted student loans, she was ineligible to receive a Pell Grant to cover the cost. Like many in her position, she didn’t know how much she owed or to who. For over a year, Amanda attempted to bring her loans into good-standing in order to become eligible to finish her degree. She lacked access to the internet, so, with no other option, she turned to sending ED a handwritten letter explaining her situation. When she received paperwork to verify her incarceration, she did everything she was asked. Nearly a year later, she had yet to hear anything about the status of her loans and remained in default.

Thankfully, Amanda’s situation turned around. Through the Michigan Reconnect scholarship, Amanda was able to cover the cost of education and pursue her associates degree without depending on the Pell Grant. In 2021, Michigan added ED’s phone number to its pre-approved call list, allowing Amanda to finally talk to them directly about her situation.

Amanda was prevented from enrolling in the associate’s degree program for over a year because she was in default over a mere $93.05. Today’s announcement could ensure that incarcerated individuals do not have to endure the labyrinth that Amanda did.

Congress prohibited incarcerated students from receiving new federal student loans, including consolidating their loans, in the Higher Education Amendments of 1992 (revisions to the Higher Education Act). Two years later, Congress passed the Violent Crime Control and Law Enforcement Act of 1994 that prohibited incarcerated students from receiving Pell Grants, effectively cutting off access to federal student aid with limited exceptions. The National Conference of State Legislatures has reported that before these actions, there were more than 770 higher education programs nationwide for incarcerated individuals. After these individuals could no longer access federal financial aid, college-in-prison programs began to shut down. By 1997, just three years later, only eight programs remained.

Further Reading

Read Student Borrower Protection Center and National Consumer Law Center’s initial report on intersection of mass incarceration and the student debt crisis: Collection At All Costs: Examining the Intersection of Mass Incarceration and the Student Debt Crisis

Read Student Borrower Protection Center’s follow up report on incarceration and necessity of student debt cancellation: Collection At All Costs: Unlocking Cancellation for Incarcerated Borrowers

Read SBPC’s complaint against ED for failing to respond to its FOIA request: SBPC v. U.S. Department of Education

For incarcerated individuals or their loved ones: Dealing with Student Loans While Incarcerated


About Student Borrower Protection Center

Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.

Learn more at or follow SBPC on Twitter @theSBPC.

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