Student Loan Borrowers Will See Two New Changes from the Education Department Soon

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The U.S. Education Department is taking steps to forgive certain types of student loan debt under the Public Service Loan Forgiveness program. A recent investigation by NPR revealed that Income-Driven Repayment (IDR) plans for federal student loans have been “badly mismanaged.” New policies seek to rectify some of the issues and create more transparency when it comes to IDR payments and repayment options.

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As a result of the changes, more than 40,000 borrowers will have their debts forgiven and another 3.6 million borrowers could get three years or more of additional credit toward IDR debt 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,” Secretary of Education Miguel Cardona said in a statement on Apr. 19.

The U.S. Department of Education will make changes in two key areas:

  1. Forbearance steering
  2. IDR tracking
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1. Education Department Will Oversee Forbearance Use

Many borrowers have been steered toward loan forbearance programs, which can delay opportunities for loan forgiveness. Borrowers who use IDR programs instead of forbearance might be eligible for reduced payments while keeping their loan in good standing and making progress toward forgiveness, Ed.gov reported.

Forbearance is not always in the borrower’s best interests. The Federal Student Aid (FSA) will restrict loan servicers’ ability to enroll borrowers in forbearance by text or email, Ed.gov stated in a press release issued Apr. 19.

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Additionally, borrowers who maxed out their forbearance limits, using forbearance for either 12 months in a row or for a cumulative span of 36 months, will have their accounts adjusted. That time will now count toward loan forgiveness under IDR and PSLF plans.

Borrowers with shorter forbearance terms can seek account review by filing a complaint with the FSA Ombudsman, the Ed.gov release stated.

2. FSA and Loan Servicers Will Fix IDR Payment Counting System

FSA will revise all IDR-qualifying payments for Direct Student Loans and Federal Family Education Loan Program loans. Regardless of the repayment plan, any months when borrowers made payments (even if the payment was $0), will move the borrower closer to eligibility for loan forgiveness.

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FSA will also count months in deferment prior to 2013 toward forgiveness.

Moving forward, FSA and loan servicers will be charged with keeping accurate records regarding progress toward loan forgiveness. Borrowers will be able to view their IDR payment counts at StudentAid.gov beginning in 2023.

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While the new initiatives will make a big impact in student loan debt across the U.S., some don’t believe it is enough. Calling it a “small step,” CEO and president of the National Association of Federal Student Financial Aid Administrators Justin Draeger told Inside Higher Ed., “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.”

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.

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