ED Takes Steps To Fix Failures in Student Loan Programs

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Pexels Karolina Grabowska 4386395On Tuesday, the U.S. Department of Education (ED) made moves to address longstanding dysfunction in the public service loan forgiveness (PSLF) program as well as income-driven repayment plans (IDR) for federal student loan borrowers.

Federal Student Aid estimates that the announced changes will lead to immediate debt cancellation for at least 4,000 borrowers under PSLF and several thousand borrowers with older loans in IDR. According to ED, more than 3.6 million borrowers will also get at least three years of "additional credit toward IDR forgiveness."

"Student loans were never meant to be a life sentence, but it's certainly felt that way for borrowers locked out of debt relief they're eligible for," said U.S. Secretary of Education Dr. Miguel Cardona. "Today, the Department of Education will begin to remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers enrolled in IDR plans."

IDR plans were designed to help borrowers make more affordable monthly payments on their federal student loans based on their income. Some borrowers in IDR plans can qualify for a zero monthly payment. After about 20 or 25 years of payments, borrowers enrolled in IDR plans could also be eligible to have their debt forgiven.

Yet recent reports found that many loan servicers have been steering borrowers into forbearance in violation of ED's rules, even when borrowers were eligible for IDR plans. In response, ED said that it was ending this so-called forbearance steering. The department further announced actions to strengthen federal loan servicer oversight.

ED stated that it would additionally improve how it tracks borrowers' payments in IDR plans, better ensuring that credit toward debt forgiveness is accurately counted. Among the department's announced changes was also a one-time revision of IDR payments to address previous inaccuracies.

Advocates praised the moves while calling for additional reforms.

"We urge the department to provide full, automated relief to all borrowers affected by forbearance steering, payment tracking errors, and other administrative failures - and to provide the same relief to borrowers who have experienced loan default," said Sameer Gadkaree, president of The Institute for College Access & Success, a think tank and advocacy group. "The Department must also conduct robust outreach to ensure all borrowers - including those with older loans and those in default - receive all benefits to which they are entitled."