Education Department Moves to Fix Student Loan Repayment Programs
Categories: US Education News
The Education Department announced a slate of changes to its federal student loan repayment programs on Tuesday to correct harmful practices by its loan servicers, which investigations found steered borrowers into forbearance without outlining their other options and hindered their progress toward loan forgiveness by inaccurately tracking their monthly payments.
The changes are set to result in immediate debt cancellation for 40,000 borrowers enrolled in the Public Service Loan Forgiveness program and help 3.6 million borrowers recoup at least three years worth of credit toward forgiveness under the income-driven repayment plan, which caps monthly payments at 10% to 20% of a borrower’s income and entitles them to loan forgiveness after 20 years of payments.
“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,” Education Secretary Miguel Cardona said in a statement.“Today, the Department of Education will begin to remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers,” he said.
“Forbearance may be quick and easy for services, but they are often not the best option for borrowers, particularly when the borrower would be eligible for an economic hardship deferment or a low or zero payment on an [income-driven repayment] plan,” James Kvaal, Undersecretary of Education, said on a call with reporters Tuesday.
To correct the harm incurred by pushing borrowers into forbearance, the department will conduct one-time account adjustments that will count forbearances of more than 12 months consecutive and more than 36 months cumulative toward forgiveness under the Public Service Loan Forgiveness Program or the income-driven plan.
A separate review by the Federal Student Aid office revealed “significant flaws” with Income-driven repayment plans, including difficulty tracking payments, paperwork errors and past implementation inaccuracies, which suggest millions of borrowers potentially lost ground on their progress toward forgiveness.
To correct the problems, the federal student aid office will count any months in which borrowers made payments toward their income-driven plan, regardless of the payment plan they were enrolled in at the time and regardless of whether they were made prior to consolidating loans. The federal student aid office is also set to issue new guidance to student loan servicers to ensure accurate and uniform payment counting practices, department officials said.
“We wanted to act as quickly as possible to address these problems but we expect these figures to only grow,” Kvaal said. “Growing levels of student loan debt have burdened young people just as they are starting their lives. And what’s worse is that they have left many students worse off than if they had never attended colleges at all and they exacerbate the racial wealth gap.”
Regardless, for a brought together coalition of reformists in the House and Senate, it isn't adequate. They've been driving Biden to drop $50,000 in government student credit commitment since he was sworn into office, framing it not similarly as a strategy for facilitating monetary tension that excessively impacts low-pay Dull and Hispanic borrowers yet what's more as a commitment to voters of assortment who were crucial to his election.
The lawmakers battle that the pioneer authority Biden is at present using to drop the interest owed on all legislatively held student credits and surrender portions - Fragment 432 of the High level training Act - is a comparable power he could use to give wide-scale student commitment clearing out.
"The Biden association requirements to have it the two different ways," Sen. Richard Burr, North Carolina moderate and situating individual from the Prosperity, Guidance, Work and Annuities Board, said earlier this month when the White House pronounced the most recent reprieve.
“They want to tout America’s return to normal following the pandemic but also want to keep extending emergency relief policies. It’s long past time for student loan repayments to resume as normal.”Education Department officials said additional announcements are to come regarding its development of a new repayment plan that will “substantially reduce” payments for most borrowers.“We will make long overdue changes to fix longstanding and frankly inexcusable problems,” Kvaal said.