Student loan repayment plan failed for borrowers ‘at all levels’, organizations say
- NPR recently exposed deep flaws in income-driven student loan repayment plans.
- In light of the results, more than 100 groups have urged Biden to reform plans and provide permanent relief.
- Only 32 student loan borrowers have ever received the forgiveness promised under the plans.
Following a brutal NPR investigation exposing flaws in a popular student loan repayment program, advocates are stepping up pressure on the president to implement reforms.
On Thursday, 116 organizations, led by the Student Borrower Protection Center, urged Education Secretary Miguel Cardona in a letter to reform income-contingent repayment (IDR) plans. Passed by Congress in 1992, the IDR plans aimed to give borrowers affordable debt repayments by creating a monthly student loan payment plan based on the borrower’s income and family size. He promised loan forgiveness after 20 to 25 years on the plan.
But to date, only 32 borrowers — in total — have qualified for full forgiveness, and NPR’s Cory Turner recently revealed in an investigation that the program’s flaws are far worse than publicly known. He found that major student loan companies did not track payments made by borrowers under IDR plans, and that low-income borrowers were the most affected by mismanagement.
In light of these findings, the organizations renewed their calls for Cardona to create an IDR waiver that would compensate for past mistakes that hurt borrowers enrolled in IDR plans.
“In short, a program created to help the most vulnerable borrowers failed to do so across the board,” they wrote. “An IDR waiver is needed to help right the wrongs done in the past, as student borrowers – and, in particular, low-income borrowers and borrowers of color – have been burdened by failures in the administration of the program. IDR which created undue financial hardship.”
Insider reported in January on recommendations from the Student Borrower Protection Center, along with the Center for Responsible Lending and the National Consumer Law Center, for an IDR waiver. They suggested that the waiver be retroactive, automatically grant relief, and apply to all borrowers eligible for IDR.
According to Education Department data, 4.4 million borrowers on IDR plans have been repaid for 20 years or more as loopholes in the program prevent them from repaying their debt. A February report from NerdWallet also found that those with higher debt are more likely to get rebated through IDR, but will have to pay “exorbitant interest,” further underscoring the need for program reform.
In December, President Joe Biden announced IDR reforms, such as temporarily reducing paperwork requirements in applications, but the groups argued that permanent solutions were needed to provide meaningful relief to borrowers – and lawmakers agreed.
“This is an urgent problem that needs real solutions,” Senator Patty Murray said in a statement. “We need a workable IDR plan for all borrowers, and we need to ensure that those who have been stuck in repayment for more than 20 years get the debt relief they are owed,” he said. she adds.