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The Department of Education announced that student loan borrowers will get help after a bombshell NPR report revealed years of complaints.
Millions of borrowers will be considered to receive retroactive assistance this year if they were previously harmed or held back by “flawed” income-driven repayment (IDR) plans, with the ED calling the plans' long-standing problems and mismanagement "inexcusable".
This major announcement comes after the public fallout of NPR’s investigation, How the most affordable student loan program failed low-income borrowers,which highlighted that the Education Department, and the loan servicing businesses it hires, have been shown to have mismanaged these IDR plans, which purport to offer low monthly payments, as low as $0/mth, and loan forgiveness after 20-25 years.
"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," stated the U.S. Education Secretary Miguel Cardona.
According to the agency, the revisions will result in debt forgiveness for at least 40,000 borrowers who will now be eligible for Public Service Loan Forgiveness. In addition, thousands more borrowers will now be eligible for IDR debt forgiveness.
This comes after the stunning discovery in 2021 that 4.4 million borrowers had been repaying their loans for at least 20 years but only 32 had received forgiveness under IDR programs.
Although many borrowers were hoping for cancellation on May 2, 2022, a final payment extension was granted until August 31, 2022 instead. As a result of Tuesday's announcement, millions of borrowers will be credited with months, if not years, of additional credit towards future cancellation.
New Education Department commitments
Long-term forbearances will be applied to qualifying payments for cancellation.
Inaccuracies in counting qualifying payments will be remedied.
Tracking of the borrower’s progress towards loan cancellation will be updated.
How this Affects Borrowers
These modifications will take place automatically; however, it may take some time. The government claims that these updates to borrower records will be applied automatically, but it must first replace its archaic National Student Loan Data System (NSLDS). As a result, loan cancellations will not begin to occur until the fall of this year.
While the department's proposals meet some House and Senate education committees' criteria, it fell short in at least one area. Top Democrats urged the agency to give debtors credit for all previous periods of forbearance, not only long-term pauses, towards loan cancellation.
This announcement comes just days before the US Government Accountability Office is set to unveil the findings of its own inquiry into IDR's shortcomings.
Rep. Bobby Scott, D-Va. said in a statement "With today's announcement, borrowers in Income-Driven Repayment will finally have consistent access to the loan forgiveness they've been promised and working toward... While the Department has taken important steps to assist borrowers, we recognize that more needs to be done to reform our flawed student loan system, particularly the Income-Driven Repayment programs."
Review Your Account For Errors Now
Do you have questions about your IDR program? Edapt Student Services can assist you with ensuring that your account is in the best possible position before the Cares Act expires in August. Contact Us today.