The Department of Education announced that it will issue credits to some federal student loan borrowers after its mismanagement of loan-forgiveness programs.
The waivers will help millions of borrowers move toward loan forgiveness. Income-Driven Repayment plans originally promised low monthly payments and loan forgiveness to those holding federal student loans after 20 to 25 years — but an NPR investigation revealed that the Department of Education mishandled these plans, WHYY reported.
The changes will also assist borrowers seeking loan forgiveness under the Public Service Loan Forgiveness program.
In 2021, it was discovered that millions of IDR enrollees who were eligible for loan cancellation had not received it. Progress toward IDR forgiveness was not being tracked in many cases, according to a Department of Education press release.
Loan servicers had also previously offered forbearance, in which a borrower in financial distress can pause their payments but will still accrue interest, for periods longer than allowed by Department regulations.
For borrowers who were hurt by the program’s mismanagement, the Department will retroactively credit them with one-time waivers and adjustments, the New York Times reported.
It will also correct inaccuracies in the recording of qualifying payments that were revealed by the NPR investigation, WHYY reported. The announcement promised to better track progress towards loan forgiveness for IDR borrowers so they may receive it when they are eligible.
“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,” U.S. Secretary of Education Miguel Cardona said in the press release.
3.6 million IDR borrowers will receive credit for at least three years of payments, and several thousand will be eligible for debt cancellation. Over 40,000 in the Public Service program will also qualify for loan forgiveness.
The announcement comes after pressure on the Biden administration from progressive Democrats to improve the federal student loan repayment system, the New York Times reported. It is one of several recent changes pursued by the administration.
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