Education Department makes fixes to federal student loan programs

The U.S. Department of Education announced Tuesday that it would make several changes to fix student loan programs and help borrowers move toward debt forgiveness.

Those changes include ending “forbearance steering,” which occurs when loan servicers place borrowers in forbearance in violation of department rules even when their monthly payments under an Income-Driven Repayment plan could have been as low as zero dollars. Most borrowers on an Income-Driven Repayment plan can receive debt forgiveness after 20 or 25 years of repayments if servicers accurately track their progress. These plans include Income-Based Repayment and Revised Pay As You Earn plans.

“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,” U.S. Secretary of Education Miguel Cardona said. “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. These actions once again demonstrate the Biden-Harris administration’s commitment to delivering meaningful debt relief and ensuring federal student loan programs are administered fairly and effectively.”

The department estimates that these changes could help more than 3.6 million borrowers receive at least three years of additional credit to their IDR forgiveness, while approximately 40,000 borrowers will receive immediate forgiveness.