Student loan forgiveness is on the way for more than 800,000 borrowers
ADRIAN FLORIDO, HOST:
Thirty-nine billion dollars. That is the amount of student loan debt that the U.S. Education Department will erase for borrowers who were denied the benefits of one program. It was designed to help people based on their income. The announcement came earlier today, and it's part of a promise the Biden administration made last year, in part in response to an NPR investigation. NPR's Cory Turner led that investigation, and he joins me now. Hi, Cory.
CORY TURNER, BYLINE: Hey, Adrian.
FLORIDO: Cory, tell us about this program. It must have been pretty broken if it needed a $39 billion fix.
TURNER: Yeah. I mean, even Education Secretary Miguel Cardona, in announcing the changes today, used that very word - broken. The problems all stem from a repayment plan that pegs a borrower's monthly payments to their income, so folks with lower incomes have lower monthly payments, even as low as $0. It was meant to be a safety net in the federal student loan program. These income-driven plans - IDR plans - have also, for years, promised borrowers that if they make these monthly payments for 20 years, Adrian, the government would then forgive whatever's left after that. Here's the problem - borrowers were spending 20 years or more in this system, but nobody was getting forgiveness. There was this one incredible review from borrower advocates that came down in 2021, in the spring. Abby Shafroth was part of it. She's an attorney at the National Consumer Law Center.
(SOUNDBITE OF ARCHIVED RECORDING)
ABBY SHAFROTH: We found that there were over 4 million borrowers who had been in repayment for over 20 years, but that only 32 borrowers had ever had their loans forgiven through the IDR program. That's 32 borrowers out of more than 4 million.
FLORIDO: Wow.
TURNER: Now, Adrian, at least as part of this fix, 800,000 of them are going to be getting their debts erased, and that includes - this is worth noting - some of the oldest borrowers with some of the oldest loans in the entire system.
FLORIDO: Well, what wasn't working in this program that made it so hard for borrowers to get this debt relief?
TURNER: Yeah. So first, for years when low-income borrowers would call their loan servicer and say, help, I can't afford my payment, servicers would often simply put them into forbearance and not an IDR plan. And then in April of 2022, NPR published an investigation that I did with my editor, Nicole Cohen, around a bunch of leaked Ed Department documents that we found that showed even more problems and that the department knew about them for years. So those include several loan servicers weren't even keeping track of borrowers' payments, so they had no idea when a borrower actually qualified for forgiveness. We also found that the record system that Ed and its servicers use is so bad that when a borrower is transferred from one servicer to another, which happens fairly often, their payment history can get cut off or even lost. And keep in mind, Adrian, that is a problem when getting forgiveness depends on somebody having 20 years of really good records.
FLORIDO: Sure.
TURNER: So not long after we published our findings, the Biden administration pledged to do a one-time review of millions of borrower accounts, essentially giving them retroactive credit for all sorts of time that should have counted towards forgiveness but didn't, and that is what we're seeing right now.
FLORIDO: Cory, does this announcement today have anything to do with the Supreme Court's recent decision to strike down President Biden's big debt relief plan?
TURNER: No. It's a little confusing. It's just weird timing. It's also worth noting, though, while we're talking about the court, Adrian, that this action is likely not vulnerable to a court challenge because it is essentially the Ed Department trying to fix some very serious long-standing problems within the student loan program.
FLORIDO: OK. So is there anything that borrowers will need to do in order to qualify for this relief?
TURNER: For the most part, no. This is an automatic review the department is doing of borrower records, but there is one group that does need to act. They have very old federal loans that are known as FFEL loans. They are not held by the government. They are held by commercial lenders. These borrowers need to consolidate these old FFEL loans into a new federal direct loan in order to qualify. There is time. This review is far from over. Ed says it's going to take them into 2024, which is important. I think these 800,000 borrowers are really just the beginning.
FLORIDO: That's NPR's Cory Turner. Thank you.
TURNER: You're welcome.
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