3 takeaways from NPR’s investigation into a struggling student loan repayment program

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An NPR investigation found that a federal program intended to help low-income student borrowers, and possibly offer them debt forgiveness, has failed to deliver on its promises.

More than 9 million borrowers are currently enrolled in income-contingent repayment (IDR) plans, which are designed to help people who cannot afford to make large monthly payments. The plans promise loan forgiveness after 20 to 25 years. But documents obtained by NPR offer stark evidence that those plans were mishandled by loan officers and the US Department of Education.

Taken together, these records paint a stunning picture of the failure of IDR and cast a shadow over the federal student loans program. While the Biden administration didn’t create these problems, it must now address them as it weighs in on restarting reimbursement after a two-year pandemic pause.

In response to NPR’s request for comment, a Department of Education spokesperson said on Friday, “Borrowers trust us to ensure these plans work as intended, and we intend to honor “This trust. We are aware of historical issues with past processes that had undermined the accurate tracking of eligible payments. The current situation is unacceptable and we are committed to addressing these issues.”

Here are three takeaways from NPR’s investigation, which you can read in full here:

1. Some servicers had no idea when borrowers qualified for the discount.

IDR plans offer borrowers a manageable monthly payment (as low as $0) as well as loan forgiveness after 20-25 years of qualifying payments. It is the servicer’s job to count the number of payments a borrower has made and then notify them when they are eligible for loan forgiveness.

But an unpublished 2016 review of repairers, conducted by the Department of Education’s Office of Federal Student Aid, found that three repairers – PHEAA, CornerStone and MOHELA – had “no rebate payment meters IDR” to track borrowers’ progress towards cancellation.

Borrowers with PHEAA accounts, for example, would have had to request a manual tally of past payments to assess their eligibility for cancellation.

This means that some service agents did not know if borrowers were eligible for cancellation unless they were asked by the borrowers to perform a labor-intensive file review.

2. Mismanagement of the IDR is particularly harmful for lower income borrowers.

Under the IDR, a monthly payment of $0 for a borrower earning less than 150% of the federal poverty level should still count toward loan forgiveness. But in the same 2016 review, officials warned that “zero ($0.00) IDR remittance-eligible payments are not properly tracked.”

Nearly half of all IDR borrowers make monthly payments of $0, according to a 2019 analysis by the Center for American Progress (CAP). Failure to track these payments could delay or derail millions of lower-income borrowers on their way to loan forgiveness.

3. Transferring borrowers between service agents is a phone game.

According to documents obtained by NPR, moving borrower accounts is incredibly cumbersome. Borrower information is transferred via what is known as an EA27 file, and each time a file is transferred, data and context can be lost and errors can be made. In fact, earlier versions of the EA27 didn’t even include payout counts for some IDR plans.

Now consider that almost all borrowers who could eligible for cancellation under the IDR over the next few years saw its accounts transferred at least once, when the federal government moved from one loan servicer to many. This means that their current records, including the number of their progress towards cancellation, could be built on the sand of faulty data.


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