Student loan borrowers feel the greatest burden of mistakes made when tracking repayment history

To help student borrowers stay on track to repay their loans – and also receive any required debt write-offs in a timely manner – the Ministry of Education and its supervising loan services must keep a close eye on their payment history. But in recent years, controls from the Ministry of Education and others investigations have found inaccuracies in the payment histories maintained by loan services, causing problems for student loan borrowers who follow certain targeted loan relief programs.

In addition to these targeted relief programs, more than 9 million people participate in student loan-based income (IDR) repayment schemes, which are widely eligible, link monthly payments to borrowers’ incomes, and allow write-offs after 240 or over. 300 months eligible payments – generally defined as payments made in full, on time and when the loan is not deferred, tolerated or grace period. Interviews conducted by The Pew Charitable Trusts with borrowers enrolled in IDR programs found that some expressed uncertainty that their unpaid balances would be forgiven after fulfilling their repayment obligations. And on April 1, NPR mentionted that payment histories for some borrowers in IDR programs may contain incorrect or missing information.

The NPR report suggests that some servers did not regularly monitor when IDR-registered borrowers were eligible for forgiveness and, in addition, did not adequately credit the $ 0 payments made by some low-income IDR borrowers. In addition, the history of some borrowers making IDR payments on their loans before default can be lost when they return from default to active repayment. These findings are important: Incomplete or incomplete payment history information could cause loan write-off delays and, in some cases, may require borrowers to make payments even if they have exceeded the write-off threshold.

Inaccurate payment histories are a major hurdle as loan services and the Department of Education try to get borrowers back on board after pandemic-related payments cease: Although IDR remains an important tool for low-income borrowers to access affordable monthly payments and has been made proved To reduce delinquency and default rates, problems with program management could jeopardize the long-term financial stability of many borrowers. Congress should oversee recent issues – and investigate whether the Department of Education needs additional resources, know-how or legislation to address these issues and prevent similar difficulties in the future.

Pew recommends two steps to begin addressing potential issues that have been identified in recent reports:

  • Review IDR borrowers’ payment history to ensure that their progress towards forgiveness is accurately measured: This first step by the Ministry of Education could lead to follow-up actions to correct past mistakes — perhaps similar to the temporary exemption created for participants in the Public Service Loan Forgiveness Program in the fall of 2021 to address similar issues with eligible payments.
  • Make clear to all IDR borrowers information about the number of their payments and their progress towards forgiveness: This timely communication from the Department of Education and loan servicers should also include clear information about the borrowers’ accounts, their progress toward forgiveness, and steps taken to address issues with history accuracy. payments.

In addition, Pew advises policymakers to implement many more long-term, systemic changes to improve borrowers’ performance on the repayment system:

  • Strengthen federal student loan service oversight: As part of the Ministry of Education’s forthcoming procurement process for student loan service agreements known as Consolidated Service and Data SolutionNew supervisory measures should be implemented to ensure that loan services regularly and accurately monitor IDR borrowers’ progress towards forgiveness.
  • Create better tools for borrowers to keep real-time tracking of their payment history and forgiveness progress: These options could be made available through the portal already used by borrowers to make payments and access information about their loans. Creating a regularly updated counter for each borrower’s payment history will also help increase the transparency of the program.
  • Examine whether forms of “incremental” forgiveness are administratively feasible for future and current IDR plansForgiving borrowers’ balances at intervals before the current thresholds can help them stay committed to repayment – and could serve as a constant check to ensure that payments are accurately counted. Student loan services have been in the past suggested similar policies that could provide an initial plan.
  • Allow unpaid borrowers to register directly with IDR: Borrowers who have defaulted must pass complex and confusion of administrative procedures for restoring their loan to “current” state by “default”. Allowing unpaid borrowers to enroll directly in an affordable IDR program would facilitate this transition and possibly facilitate the monitoring of their historical payments by the Department of Education and services.

Regan Fitzgerald is the director and Jon Remedios and Brian Denten are senior contributors to Pew’s work on student loan success.

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