The U.S. Department of Education today announced several fixes to some failures in the federal student loan programs. The fixes will address the impact of forbearance steering and inaccuracies in the tracking of qualifying payments for loan forgiveness.
The fixes will increase the number of qualifying payments for Public Service Loan Forgiveness (PSLF) and forgiveness after 20 or 25 years in an income-driven repayment (IDR) plan. More than 3.6 million borrowers will benefit, including 40,000 borrowers who will have their student loans forgiven immediately.
Forbearance Steering
The U.S. Department of Education alleges that some loan servicers steered borrowers into forbearances instead of income-driven repayment plans.
Interest continues to accrue during a forbearance. In contrast, when a borrower is in an income-driven repayment plan, accrued but unpaid interest may be paid by the federal government.
Another difference is that forbearances don’t count toward loan forgiveness, while payments in an income-driven repayment plan do count, even if the calculated payment is zero.
To address forbearance steering, the U.S. Department of Education will make a one-time adjustment to count long-term forbearances toward the number of qualifying payments for loan forgiveness.
The adjustment, which will be automatic, will benefit borrowers who were in a forbearance for more than 12 consecutive months or more than 36 months in aggregate.
Borrowers who feel they were victims of forbearance steering but for a shorter duration can request an account review by filing a complaint with the FSA Ombudsman.
The U.S. Department of Education will increase its oversight of the use of forbearance by loan servicers.
Improve Accuracy of Payment Tracking
Some loan servicers have not been tracking borrowers’ progress toward forgiveness after 20 or 25 years in an income-driven repayment plan. The forgiveness is supposed to be automatic, but how can the U.S. Department of Education implement it if the loan servicers haven’t been counting the number of qualifying payments?
The U.S. Department of Education will make an adjustment to the number of qualifying payments. All payments made will count toward the 20 or 25-year forgiveness, even if it is unclear whether the payments were made in an income-driven repayment plan.
Payments made prior to consolidation will also count toward loan forgiveness.
In addition, all months spent in a deferment prior to 2013 (other than an in-school deferment) will count toward IDR loan forgiveness. The economic hardship deferment counts toward IDR forgiveness. However, prior to 2013 it is not possible to distinguish months in an economic hardship deferment from months in other types of deferments, other than in-school deferments.
Borrowers who have made the number of payments required for forgiveness will have their loans automatically forgiven after the adjustment is made to the number of qualifying payments.
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April 20, 2022 at 01:37AM
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U.S. Department Of Education To Fix Some Failures In Student Loan Programs - Forbes
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