Changes to student loan programs could bring millions closer to getting out of debt, says Department of Education

The Department of Education announced Tuesday fixes to several student loan programs that will give thousands of borrowers immediate student loan debt relief and bring millions more years closer to student loan forgiveness. It comes as the Biden administration continues to consider canceling student loan debt for millions of Americans.

The changes will be made to the government loan forgiveness programs and income-based payback plans. According to the Department of Education, the fixes will bring immediate forgiveness to 40,000 borrowers and bring at least three years closer to relief for at least 3.6 million borrowers through income-related repayments.

“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers who are not eligible for debt relief,” Education Minister Miguel Cardona said in a statement. He said the move begins to “fix years of administrative errors,” and the actions demonstrate the administration’s commitment to “provide meaningful debt relief and ensure federal student loan programs are administered fairly and effectively.”

A review by the Federal Student Aid Office found that some service providers had lent borrowers facing financial difficulties, in violation of regulations that require borrowers to be given clear, accurate information about their options to stay away from late payments . This happened even when monthly payments under income-based repayment plans could have taken their payments down to $0, the Department of Education said.

To address the issue, the Department of Education will make a one-time adjustment to count certain long-term forbearance toward income-based and public-service forgiveness. The changes will be automatically applied to borrowers’ accounts later this year. Borrowers who have been steered into shorter-term forbearance can also obtain account reviews. At the same time, the administration will increase oversight of service providers’ ability to register borrowers for the forbearance, including working with the Consumer Financial Protection Bureau to conduct regular audits of the use of the forbearance.

Meanwhile, the Department of Education’s review of the income-based repayment program found “significant deficiencies” that suggest borrowers missed progress toward forgiveness. The Federal Student Aid Office is conducting a one-time overhaul of earnings-related payments so that every month a borrower has made counts toward forgiveness, regardless of what repayment schedule they are on. This includes payments made prior to loan consolidation. For those who have made the required number of payments – usually 120 – the credits are automatically cancelled.

To fix the problem permanently, the Department of Education will issue new guidance for service providers. Beginning next year, borrowers will be able to log into their accounts through the Federal Student Aid Office to view their own progress toward an income-based waiver online. In addition, the Department of Education plans to take steps to further simplify the counting of payments by allowing more loan statuses to count towards income-based forgiveness.

The effort announced Tuesday comes as the Biden administration has already forgiven more than $17 billion in debt for about 725,000 borrowers since President Biden took office.

Earlier this month, the White House also announced an extension of the federal student loan payment pause to August 31. White House Press Secretary Jen Psaki said so recently Management would make a decision until then, on student loan debt cancellation, or the hiatus would be further extended.

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