Biden admin moves to fix "longstanding failures" in student loan programs
The Department of Education on Tuesday announced new steps to address "longstanding" and "inexcusable failures" in federal student loan programs.
Why it matters: As Axios previously reported, the move comes as the Biden administration is being pressured to take broader steps to cancel student debt. While the moratorium on federal student loan payments was extended through August, lawmakers are pushing for the White House to cancel $50,000 in debt per borrower.
- During his presidential campaign, President Biden pledged to forgive $10,000 in student loan debt per person.
State of play: The department, via rulemaking, will review how income-driven repayment (IDR) plans are administered, adding that it has found "significant flaws that suggest borrowers are missing out on progress toward IDR forgiveness," according to a press release.
- It is also moving to end "forbearance steering," which happens when loan services place borrowers into forbearance without giving adequate information about their alternatives, including IDR plans, which make it easier for borrowers to pay back loans if their debt is high when compared to their income.
- By being led into forbearance, borrowers' loan balance and monthly payments grow "due to interest capitalization and lead to delinquency or default."
What's happening: The department will automatically apply IDR credit for borrowers who ended up in forbearance.
- It will conduct a one-time review of IDR-qualifying payments for different loans, and will make it so that any months in which borrowers made payments will count toward IDR. Additionally, any borrower who has made the required number of payments for IDR forgiveness based on the revision will receive loan cancellation automatically.
The department said that their actions will result in the immediate student loan debt cancellation of at least 40,000 borrowers under the Public Service Loan Forgiveness Program, and thousands more will become eligible for loan discharge under IDR.
- More than 3.6 million borrowers will also receive at least three years of additional credit toward IDR forgiveness.
What they're saying: "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," said Secretary of Education Miguel Cardona in a statement.
Don't forget: The average federal student loan debt is $37,013, according to data compiled by the Department of Education.
- 'The crisis disproportionately impacts Black borrowers," Axios' Shawna Chen reported.
What we're watching: Administration officials told reporters that the Biden administration is developing a new repayment plan to "substantially" reduce monthly payments for borrowers.