The student loan industry has been full of bureaucratic hurdles for millions of borrowers since its inception – and a new government report reveals that there is still much work to be done. A recent focus of President Joe Biden’s Department of Education and activists has been income-based repayment programs designed to keep borrowers’ monthly payments affordable, sometimes up to $ 0 based on family income. These plans were signed into law by Congress in 1992 and are now managed by the Department of Education, these plans promise a complete loan write-off after 20 or 25 years. “Student loans were never intended to be life sentences, but it certainly feels that way for borrowers who have been excluded from the debt relief they are entitled to,” Education Minister Miguel Cardona said on April 19, announcing the steps designed to bring 3 , 6 million borrowers. income-based repayment plans closer to forgiveness. The department intends to do this by conducting a one-time review of the borrowers’ accounts to credit them for months in previously unpaid repayments, something that could have happened if they were in a different repayment plan or deferred. The next day, a report from the Government Accountability Office questioned the effectiveness of the plans. As of June, according to the GAO report, the Ministry of Education had approved just 157 loans for full forgiveness under income-based repayment plans, with 7,700 more loans “potentially eligible” for forgiveness. The report said it could not conclude conclusively whether these thousands of extra loans were eligible due to “Education data gaps”. In response, he said, in February he issued recommendations to the Ministry of Education encouraging it to better verify and monitor payments made under IDR projects. Melissa Emrey-Arras, author of the GAO report, told Insider that she was “pleased” that the department “agreed with the findings and recommendations from our report and is taking steps to implement our recommendations”. The focus on income-driven repayment comes just weeks after Biden extended the pandemic pause on all federal student loan repayments until Aug. 31, following calls from Democrat lawmakers and supporters who wanted to relief. It also announced plans to repatriate more than 7 million student loan borrowers before they have to repay their loans. However, while some in Congress remain skeptical about efforts to forgive student debt, supporters see the department’s recent reforms as a mere starting point.
Inability to track payments that would allow borrowers to forgive
Persis Yu, a former student loan lawyer at the National Consumer Law Center who now serves as policy director at Student Borrower Protection Center, which advocates for student loan relief, said the department’s announced steps to correct IDR were certain. “Good place to start.” But Yu is just one of the proponents who argued that the approach is not enough to fix long-standing issues that have prevented borrowers from qualifying for forgiveness under existing rules. “The ministry acknowledges that revenue-based repayment has really failed to produce the results that Congress wanted, and that there are systemic failures on the part of both the department and its employees,” Yu said, referring to contract companies. the federal government. for student loan management. “And I think recognizing this problem is very useful in terms of how we deal with it in the future.” The primary goal of the GAO report was the ability of the Ministry of Education and student loan companies to accurately track data and payments, especially when it comes to payments made before 2014 through IDR. The department announced that, as part of the IDR review, it will implement a payment tracking on the Federal Student Aid website from 2023, so that borrowers can track their progress toward forgiveness. “Education officials said data constraints make it difficult to track certain eligible payments and older loans are at greater risk for payment tracking errors,” the report said. “Until the training takes action to address such errors, some borrowers may not receive the IDR forgiveness they are entitled to.” As it turns out, the department has known inaccuracies in tracking payments for years. According to the report, issues with older eligible payment numbers came to light in 2015, but even with knowledge of these issues, the department “advises service to consider previous service metrics accurate,” GAO said. . Moreover, it is standard policy for loan companies not to regularly report the progress of payments to the borrower, and while the borrower may request information on their progress, many are unaware that they have the option to do so. “It is sincerely unforgivable,” Yu said. “And it gives a broader picture of how our system treats the most financially vulnerable people and how bad the student loan system has been for so long.”
Democrats praise the relief. The GOP disagrees with the broad forgiveness
In recent months, a growing number of Democratic lawmakers have been pushing the Department of Education to act on IDR, and have praised the latest announcement as a step forward. Senators Elizabeth Warren, Sherrod Brown and Dick Durbin said in a joint statement that it was “an important step in ensuring the effectiveness of student loan cancellation schemes and allowing low-income borrowers to pay off their debt so they can buy a home.” start a business and get fully involved in the economy. “ “We will continue to work to ensure that these programs are not overly complex, we will live up to their promise of forgiveness, and we will make it easier for all Americans to afford quality education.” But not all lawmakers aim to ensure widespread student loan relief. Virginia Fox, a high-ranking Republican member of the House Education Committee, wrote in a statement that “a program that was the spiritual child and extended by Democrats has proved a complete disaster and taxpayers are being forced to pay the bill for it. , Probably referring to the cost of writing off a loan. “Paint me shocked.” However, Democrats say the department is moving in the right direction when it comes to easing student loans. Senator Patty Murray, chair of the Senate Education Committee, said in a statement that the new developments would “make a huge difference in the lives of so many borrowers” and were an “urgently needed step in the right direction.” Do you have a story to tell about repayment plans based on student income or debt? Contact Ayelet Sheffey at [email protected]
