New Analysis: Pandemic Relief is Succeeding in Providing Access to Cancellation Programs But Needs More Time to Help Borrowers Who Are The Most Financially Vulnerable
July 21, 2022 | WASHINGTON, D.C. — “President Biden must take immediate action to fulfill the promise of the current Public Service Loan Forgiveness (PSLF) waiver (Waiver) and Income-Driven Repayment (IDR) Adjustment (Adjustment) programs,” said a group of 134 diverse advocacy organizations convened by the Student Borrower Protection Center representing millions of public service workers, today.
Through a letter signed by organizations such as American Federation of Teachers (AFT), National Education Association (NEA), National Consumer Law Center, and UnidosUS, the groups called on the administration to ensure access to affordable and manageable loan repayment for student loan borrowers by extending and expanding both of these initiatives.
President Biden announced the PSLF Waiver and then the IDR Adjustment in order to remedy the historical failures of the federal student loan system to deliver the intended relief of PSLF and IDR to the tens of millions of public service workers and low-income student loan borrowers they were designed to help. Evidence suggests that the borrowers most in need of relief, including low-income borrowers and borrowers of color, are among those most likely to have been unduly blocked from accessing PSLF and IDR.
A copy of the letter can be found here: https://protectborrowers.org/2022-07-Coalition-Letter-to-Whitehouse-Expand-IDR-PSLF
“President Biden made a bold promise to remedy the well documented failures of the Public Service Loan Forgiveness and Income-Driven Repayment programs and deliver life changing relief to millions of federal student loan borrowers. But unless these actions are coordinated and given the time and attention that they need, millions of eligible borrowers will miss out on relief,” said Persis Yu, Policy Director and Managing Counsel of the Student Borrower Protection Center. “The challenges in delivering on the PSLF Waiver and IDR Adjustment also demonstrate the urgent need for the President to think even bigger. Joe Biden must keep his promise to cancel student debt for all borrowers before anyone is asked to pay another student loan bill.”
A new analysis also released today by the Student Borrower Protection Center shows that the PSLF Waiver—which was designed to correct past policy failures that barred borrowers from relief for which they should have been eligible—has been a phenomenal success, and that it may just be getting started in delivering its powerful benefits.
According to the analysis, “the Waiver has led more borrowers to engage with the PSLF program than ever before regardless of whether they already qualify for relief. This trend stands to bridge the gap between public service and loan relief in both the short and long term, setting PSLF up for lasting success.”
The analysis notes that rather than allowing the PSLF Waiver to expire as scheduled on October 31, 2022, the Biden administration should allow it to continue on its current and accelerating course of remedying the historical breakdowns of PSLF, particularly for the marginalized borrowers who have long been the most likely to be derailed from accessing promised relief under the program.
A copy of the analysis can be found here: https://protectborrowers.org/the-pslf-waiver-has-been-a-huge-success-and-it-may-be-just-hitting-its-stride-why-end-it/
Background on IDR
For nearly three decades, Congress has been promising all people with federal student loans that student debt would be affordable and finite through income-driven repayment (IDR). However, according to data provided by the Department of Education in 2021, over 4.4 million borrowers have been in repayment for 20 years or longer. In fact, even though since 2016 it’s been possible to completely cancel student loans through IDR, following on an investigation by SBPC and National Consumer Law Center (NCLC) in 2021, the Government Accountability Office revealed that only 132 borrowers have ever successfully accessed loan cancellation—and loans remain unaffordable and a life-long burden for many—especially for Black, Latino/a and low-income borrowers.
Over the years, law enforcement, inspectors general, and policymakers at the state and federal levels have all documented that widespread failures and malfeasance have kept relief out of borrowers’ reach. Most recently, an NPR investigative report revealed rampant incompetence, misconduct, and even illegal activity permeating the IDR program.
In response, SBPC, NCLC, and the Center for Responsible Lending (CRL) sent a proposal to the Biden administration for the creation of a comprehensive “IDR Waiver,” similar to the PSLF Waiver that the administration had already announced, and that would:
- Retroactively count all months of repayment towards a borrower’s qualification for loan forgiveness, regardless of forbearance or default status;
- Provide relief automatically without putting the onus on borrowers to apply for such relief;
- Ensure that all federal loan borrowers, regardless of loan program, have access to the IDR Waiver; and
- Complement fixes to the PSLF program to ensure that student loans are affordable for all and low-income and borrowers of color and finally realize the promise of IDR student debt cancellation.
A few months later, the Administration announced the IDR Adjustment program. The effort is meant to give millions of people with student debt credit toward cancellation under IDR and make all borrowers who have been paying back federal student loans for 20 years or longer eligible for IDR cancellation.
While the IDR Adjustment offered an important lifeline to millions of borrowers, it is incomplete because it denies credit to those who have spent time in default, even though the vast majority of these borrowers had the right to pay little or nothing under IDR, and were failed by the student loan servicing industry, which should have guided them toward IDR as an alternative to default. According to Department of Education data, more than 2.3 million of these people are not past-due or in default today. However, an additional 2.1 million people with decades-old debt are past due or in default on a federal student loan and will likely not have their debts cancelled.
Background on PSLF
Congress created PSLF in 2007 to provide public service workers with student loan debt relief in exchange for a decade of service in their communities. However, as evidenced by countless borrower stories and investigations, similar to IDR, the promises of the PSLF program are not the reality for millions of public servants. An unfortunate track record of bad industry practices and ambivalence by ED led PSLF to have a 98 percent rejection rate—and to the expansion meant to fix PSLF having a 97 percent denial rate. Underlying these statistics, millions of teachers, nurses, and service members who planned their lives around the promise of eventual loan forgiveness have been cheated out of their rights.
On October 7, 2021, ED announced that it would use authority under the HEROES Act of 2003 to temporarily waive certain of the regular PSLF program requirements. Specifically, borrowers would receive credit toward loan cancellation under PSFL no matter what type of loan they had or regardless of whether they had been enrolled in the specific repayment plans generally required for PSLF. This limited PSLF Waiver is set to expire after October 31, 2022, just one year after the initial announcement, by which point borrowers must take affirmative steps to benefit from the relaxed rules and claim credit toward PSLF.
Further Reading
- 117 Organizations Urge Cardona to Restore the Promise of Income-Driven Repayment with Waiver Program
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About Student Borrower Protection Center
The Student Borrower Protection Center (SBPC) is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.