More than 800,000 borrowers will receive federal student loan forgiveness
STEVE INSKEEP, HOST:
President Biden's administration has surprise information for federal student loan borrowers. The U.S. has announced that more than 800,000 people will be getting their debts erased, part of a promise the administration made last year. NPR's Cory Turner is covering this story. Good morning.
CORY TURNER, BYLINE: Good morning, Steve.
INSKEEP: People will naturally wonder because of the timing of this, is Biden forgiving these loans in some response to a Supreme Court ruling the other day that stopped him from forgiving loans?
TURNER: No. The timing is just a little weird, but it's coincidental. This actually comes in response to years of criticism from borrowers, borrower advocates. And in fact, in response to an investigation I published in April 2022, it was not long after that the Education Department specifically said, look, we're going to fix this, and we're going to make a lot of borrowers whole. And that's what we're seeing.
INSKEEP: And this is really interesting because it points to long-term problems in student loans and in the entire program, the amount that people owed. So what went wrong with these 800,000 borrowers?
TURNER: Yes. So it all has to do with the cornerstone of the federal student loan program. It's a repayment plan based on a borrower's income that was really meant to be a safety net, Steve. So a borrower who doesn't finish a degree or doesn't end up with a good paying college - post-college job - they're not going to see their monthly payments blow up. These income-driven repayment plans - they're called IDR for short - they have one big promise at the end, and that is that if you make your monthly payments for 20 years, however small - and this is important. Many of the borrowers in IDR make so little income, they have official $0 payments.
TURNER: So the promise was you keep up with your payments for 20 years. The government is technically supposed to forgive whatever's left.
INSKEEP: That's what...
TURNER: They just didn't.
INSKEEP: OK. Why didn't they?
TURNER: Yeah, well, so there were a bunch of problems. First, it was much easier for loan servicing companies and their call center workers who deal with borrowers to actually put these low-income borrowers into forbearance instead of enrolling them in IDR. Forbearance basically means your payments are paused, but interest keeps building. It's not good. And there is evidence that millions of borrowers who could have benefited from being on a low monthly payment IDR plan were instead just dumped into forbearance.
TURNER: And then, as I said, last April, I published an investigation with a bunch of leaked Ed Department documents that I got that showed so many more problems. I found for borrowers who did make it into IDR, several servicers weren't actually keeping track of their payments or their progress towards loan forgiveness. They had no idea. I also found that low-income borrowers who were making those $0 payments - those often weren't counted either. And one of the biggest things I found was that the record system that Ed and its servicers use is so bad that often when a borrower is transferred from one servicer to another, their payment history gets lost...
TURNER: ...Or cut off. It was bad. So as soon as this came out, the Ed Department called those findings unacceptable and pledged to do a one-time review of millions of borrower accounts, essentially trying to give them credit towards forgiveness for all this missed time.
INSKEEP: OK, so we've just got about 10 seconds here. How much does it cost to give debt relief to 800,000 people?
TURNER: It's a big number. It's $39 billion. And this is really important - they're not done. This review is going to go on into 2024, and it's possible it's going to help a lot more than 800,000 borrowers.
INSKEEP: NPR's Cory Turner. Thanks.
TURNER: You're welcome. Transcript provided by NPR, Copyright NPR.