Could This Type of Student Loan Forgiveness Be Next?

The Education Department says it’s “looking” at income-driven repayment program

A person sorts out their finances.

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Student loan advocates are calling for reform of a longstanding federal loan forgiveness program for low-income borrowers—and the government may be listening. 

Key Takeaways

  • The Education Department said it’s “looking carefully” at income-driven student loan repayment plans after advocates sent a letter demanding reforms.
  • The repayment options are meant to help low-income borrowers get out from under student loans once they’ve made payments for decades.
  • Student loan borrower advocates say the plans are poorly managed and overly complex. As of January 2021, only 32 people had their loans forgiven out of around 2 million who would have if the plans worked as intended, according to one analysis.

A group of 104 organizations representing borrowers wrote an open letter last week calling on the Education Department to overhaul its income-driven repayment program like it did the Public Service Loan Forgiveness program. In October, the department issued a special waiver temporarily letting past payments from public servants count toward forgiveness when they didn’t before.

“We are continuing to explore ways to improve and are looking carefully at the experiences of borrowers on income-driven repayment plans to ensure that the promise of forgiveness is kept for borrowers on those plans,” a department spokesperson said when asked for a response to the letter.

The goal of an income-driven repayment plan, the first of which was launched in 1994, is twofold: make payments affordable and give borrowers who have already been paying for 20 to 25 years a way out. Once they’ve put in their time, the remaining balance is to be forgiven even if their income is so low they’ve made little progress toward paying it off.

However, the plans are so poorly designed that as of January 2021, only 32 people had gained forgiveness, even though 2 million would qualify if the plans worked as intended, according to an analysis of Education Department data by the National Consumer Law Center, a consumer advocacy group.

The government “made a promise to borrowers that federal student loan payments would be affordable, and that even if borrowers were low-income, through eventual cancellation, their student loans would not be a lifetime burden,” the organizations said in their letter. “IDR has failed to deliver on every aspect of that promise.”

The changes for public servants dramatically increased the number of people eligible and has resulted in nearly 70,000 people (up from fewer than 7,000 this time last year) having some or all of their loans forgiven.

Income-driven repayment plans generally require borrowers to pay a percentage of their discretionary income for either 20 or 25 years, depending on whether the loans were for graduate or undergraduate studies and the type of repayment plan. The portion of discretionary income required also varies between the various plans, ranging from 10% to 20%.

Advocates point to the extremely low number of borrowers who have gained forgiveness as a sign that the plans are too hard to navigate, require too much paperwork, and are poorly managed by the servicing companies that run them on behalf of the government.

For instance, borrowers enrolled in an income-driven repayment plan must recertify every year to update the government on income and family size, something that only about 34% of plan participants managed to do each year, according to a 2016 government study.

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  1. Student Borrower Protection Center. "IDR Waiver Coalition Letter."

  2. National Consumer Law Center. “New Government Data Exposes Complete Failure of Education Department's Income-Driven Repayment Program - National Consumer Law Center.”

  3. Federal Student Aid. “Income-Driven Repayment Plans | Federal Student Aid.”

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