New changes to the Public Service Loan Forgiveness (PSLF) program and income-driven repayment (IDR) plans will result in millions more borrowers being eligible for loan forgiveness, the Department of Education (ED) announced Tuesday.
ED said it will perform a one-time adjustment to count some borrowers’ accounts in long-term forbearances toward IDR and PSLF forgiveness, resulting in immediate forgiveness for about 40,000 borrowers under the PSLF program. Additionally, more than 3.6 million borrowers will receive at least three years of additional credit toward IDR forgiveness.
“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,” Education Secretary Miguel Cardona said in a release announcing the measures. “These actions once again demonstrate the Biden-Harris administration’s commitment to delivering meaningful debt relief and ensuring federal student loan programs are administered fairly and effectively.”
The changes announced will be applied automatically to eligible borrowers’ accounts later this year. Borrowers who were placed into shorter-term forbearances and won’t have their accounts automatically credited are able to request an account review by filing a complaint with the Office of Federal Student Aid’s (FSA) ombudsman, ED added.
The department asserts years of “forbearance steering” led to millions of borrowers — some of whom would have had monthly payments of zero dollars under an IDR plan — having their loans placed into a category that is actually detrimental to their repayment progress, and the actions announced Tuesday will help reverse years of setbacks.
A review of past forbearance use shows more than 13% of all Direct Loan (DL) borrowers between July 2009 and March 2020 have used forbearance for at least 36 months cumulatively, according to ED.
To combat the practice going forward, ED said it will increase oversight of student loan servicers placing borrowers into forbearance by restricting servicers’ ability to enroll borrowers in forbearance via text or email notifications, and conducting an external review of patterns of forbearance use and servicers’ practices to identify other potential changes to address steering.
ED also said it will work with the Consumer Financial Protection Bureau (CFPB) to conduct regular audits of forbearance use.
Additionally, ED said its review of IDR payment-tracking procedures uncovered flaws that show borrowers are missing out on progress toward forgiveness. As a remedy the department will conduct the one-time revision to fix IDR payment counting by reforming FSA’s IDR tracking tool.
“FSA will issue new guidance to student loan servicers to ensure accurate and uniform payment counting practices, and it will track payment counts in its own modernized data systems,” the announcement stated.
Further, next year FSA will begin displaying IDR payment counts on StudentAid.gov so borrowers can view their progress in real time when they log in.
Notably, the department will seek to further reform the terms of IDR plans through future negotiated rulemaking sessions, though details regarding the timeline of these efforts were not provided in the announcement.
NASFAA President and CEO Justin Draeger in a statement applauded ED’s announcement to fix what he called “long-standing administrative failures and inappropriate practices.”
“This is a small step toward rectifying the situation for borrowers who were misled or in the dark about all options available to them, and we urge the Department to continue to evaluate how the federal government and its contracted servicers can make improvements to fairly and effectively administer the federal student loan programs,” Draeger added.
A negotiated rulemaking committee late last year tackled making changes to both PSLF and IDR, though both discussion topics concluded without consensus being reached. Final regulatory language from the department following the rulemaking session has yet to be released.
Rep. Virginia Foxx (R-N.C.), ranking member of the House Committee on Education and Labor, took issue with the announcement and blamed the years of mismanagement on Democrats.
"The Department of Education has blamed everyone except itself for its ineptitude," Foxx said in a statement. "It is shameful this administration keeps putting politics above the interests of the American people."
The measures announced by ED on Tuesday come after top Democrats on the Senate and House education committees pressed Cardona in a letter to extend the pause on student loan payments and interest accrual until at least 2023 to afford more time to fix long standing issues with IDR.
Sen. Patty Murray (D-Wash.) and Rep. Bobby Scott (D-Va.) this week also called on ED to create a new and more generous IDR plan that is available to all federal student loan borrowers in addition to sunsetting some existing IDR plans that the lawmakers say add to borrower confusion.
“Borrowers have for too long, lived with ballooning debts and the false promise of loan forgiveness after 20 or 25 years in income-driven repayment,” the lawmakers wrote. “Payments must be corrected retroactively in order to provide relief to borrowers who have already been harmed by this broken safety net.”
ED pointed to a slew of measures to provide borrowers saddled by burdensome student loan debt with relief under the Biden administration and said it will continue to make improvements to the student loan system and provide borrowers with relief wherever possible.
Publication Date: 4/19/2022