NPR investigation reveals flaws in income-based reimbursement

At the end of last week, NPR released the results of an investigation showing that managers have failed to accurately track the progress of many student borrowers under income-driven repayment plans, preventing many borrowers from taking advantage of the program’s benefits.

These plans reduce monthly federal student loan payments based on the borrower’s income and family size. Most plans will cancel the remaining loan amount after 20 or 25 years of payments, but NPR’s report finds servicers routinely mishandled these accounts, making the road to forgiveness much more difficult.

Some Servicers Didn’t Track Borrowers’ Payment History

The shortcomings of income-driven repayment plans are well documented. In 2021, a National Consumer Law Center (NCLC) report found that at the time, about 2 million borrowers had been repaying their federal loans for more than 20 years, but only 32 had actually received a forgiveness through IDR. The report says managers routinely diverted borrowers from plans or provided insufficient information.

Now, NPR’s report reveals that the problem goes beyond borrowers who are simply unaware of the program. Among NPR’s findings:

  • Some services were unaware of borrowers’ IDR status and had no way of tracking payment progress, meaning services often had to count payments manually, and usually only after borrowers requested a stake. update on their progress.
  • Many repairers have not counted certain qualifying payment periods at all. Borrowers who earn less than 150% of the federal poverty level may have $0 payments, which still count toward IDR progress — but NPR found that in many cases, those $0 payments don’t. “adequately monitored”.
  • When borrowers change loan servicers, errors are transferred and compounded. Records may reach the new loan servicer with errors or omissions regarding the borrower’s repayment history, which puts the borrower at risk if they attempt to obtain loan forgiveness. This is especially true if more than one transfer occurs.

Finding a solution will be complex

Neglecting to correct the IDR process could cause big problems, says student loan expert Mark Kantrowitz. As more borrowers reach the end of their 20-year repayment period, others may have to contend with spotty record keeping that could prevent them from receiving the promised forgiveness.

Above all, Kantrowitz says the process really should be automated, as intended. “The payment meter should be provided to borrowers on and when they log into their loan officer’s website,” he says, saying this will allow borrowers to contact them if there is an error in statement of their payments. It also says that repairers should implement standardized late and partial payment policies.

As a possible solution, Kantrowitz suggests that if the Department of Education does not have a borrower’s complete payment history, it should qualify the missing history for IDR cancellation. “It’s the only way to reassure borrowers if they’re unable to reconstruct payment history,” he says.

The Education Department told NPR it would fix the issue with operational changes to the IDR and added that it would “fix this for borrowers who have been harmed by past failures with counting payments. “. However, despite advocacy groups and experts calling for retroactive payment credit, IDR waivers and correction of payment history, the department has yet to release details of its plans to rectify the situation. injured borrowers.

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