Changes are coming to student debt repayment plans.
The plans that seemed to block eligible borrowers from relief were found to have flaws.
Lawmakers and advocates said more would be needed to fix systemic issues.
The student-loan industry has been full of bureaucratic hurdles for millions of borrowers since its inception, and a new government report shows there is still a lot of work to be done.
Income-driven repayment programs, which are meant to keep monthly payments affordable for borrowers, sometimes as low as $0 based on family income, has been a recent area of focus for the Education Department and activists alike. The plans were signed into law by Congress in 1992 and are managed by the Education Department.
Student loans were never meant to be a life sentence, but it has felt that way for borrowers locked out of debt relief they are eligible for.
If they were on a different repayment plan or in deferment, the department will conduct a one-time revision of borrowers accounts to credit them for months in repayment that were not previously counted.
A report from the Government Accountability Office questioned how effective the plans had been.
The GAO found that the Education Department had only approved 157 loans for full forgiveness under income-driven repayment plans. The report couldn't conclude whether those thousands of additional loans were eligible because of the gaps in Education's data.
Recommendations were made to the Education Department in February to better verify and track payments under IDR plans. The author of the GAO report told Insider that the department agreed with the findings of the report and is taking steps to implement them.
The focus on income-driven repayment comes just weeks after Biden extended the pause on all federal student-loan payments, with waiving interest, through August 31, following calls from Democratic lawmakers and advocates who wanted to see continued relief. He said that 7 million student-loan borrowers would be restored to good standing before they had to repay their loans. The recent reforms of the department are seen by advocates as a starting point for forgiveness of student debt.
The policy director at the Student Borrower Protection Center, which advocates student-loan relief, said that the department's announced steps to fix IDR were a good place.
Yu is one of the advocates who argue that the approach is not enough to fix long-standing issues that have kept borrowers from getting forgiveness under existing rules.
The department is acknowledging that income-driven repayment really has failed to produce the results that Congress intended, and that there are systemic failures on both the department and its servicers.
The ability of the Education Department and student-loan companies to track data and payments accurately was the focus of the GAO report. The Federal Student Aid website will have a payment tracker starting in 2023 so borrowers can track their progress toward forgiveness.
Some borrowers may not receive IDR forgiveness until Education takes steps to address payment tracking errors.
The department has been aware of the inaccuracy for a long time. The GAO said that the department advises servicers to consider previous servicers' counts as accurate even though issues with older counts were brought to light in 2015.
Loan companies do not communicate payment progress with borrowers often, and while the borrowers can request information on their progress, many of them don't even know they have the option to do so.
Yu said it was inexcusable and that it showed a bigger picture of how the student loan system has been broken.
In recent months, a growing number of Democratic lawmakers have been pushing the Education Department to act on IDR, and they applauded the latest announcement as a step forward.
It is an important step to ensure the effectiveness of our student-loan cancellation programs and to enable low-income borrowers to eliminate their debt so they can buy a home.
We will make it easier for all Americans to afford a quality education by ensuring these programs are not overly complex and by fulfilling their promise of forgiveness.
Lawmakers don't always have a goal of student-loan relief. A program that was the brainchild of and expanded by Democrats turned out to be a complete disaster and taxpayers are forced to foot the bill for these mistakes, according to Rep. Virginia Foxx, the Republican ranking member of the House education committee.
Democrats believe the department is headed in the right direction when it comes to student-loan relief. The new developments would make a huge difference in the lives of so many borrowers and were an urgent needed step in the right direction, according to a statement issued by the chair of the Senate education committee.
Do you have a story about student debt or income-driven repayment plans? You can reach out to her at asheffey@insider.com.
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