After Years of Exposing IDR Failures and Calling for Remedies, SBPC Applauds Delivery of Mass Relief while Pushing Administration to Give Similar Relief for Defaulted Borrowers Left Behind
July 14, 2023 | WASHINGTON, D.C. — The U.S. Department of Education (ED) today announced it will begin automatically discharging $39 billion in federal student loan debt for over 804,000 borrowers in the coming weeks. This is part of the Biden Administration’s Income-Driven Repayment (IDR) Account Adjustment, aimed at remedying decades of historical and structural failures to deliver loan relief for borrowers who have fallen through the cracks of the broken system.
In response, Persis Yu, Deputy Executive Director and Managing Counsel at the Student Borrower Protection Center (SBPC), issued the following statement:
“After years of campaigning and advocacy, it is a huge victory that nearly a million borrowers who have been trapped in decades of never-ending payments will finally get the relief Congress intended. We applaud the Biden Administration for standing up for these borrowers who, until now, were left stranded at the whims of a cruel and broken system. This is government working for and by the people.
“But make no mistake—over 804,000 people are receiving relief with this action because of 804,000 failures—and this is only the tip of the iceberg. Working people with student loan debt have been made collateral damage by a dysfunctional student loan system. Just like we saw with Public Service Loan Forgiveness, our student loan system is riddled with structural incompetence, and vulnerable, low-income, and Black and brown borrowers face the harshest effects. Now, our leaders need to finish the job. We look forward to the Administration’s ongoing efforts to enact further relief efforts and ensure they include defaulted borrowers—those who have truly fallen between the cracks and who have been continually left behind.”
Today’s announcement is also an explicit rebuke and remedy to years of misconduct by student loan servicers. These companies are tasked with the day-to-day administrative functions of the student loan system, including providing customer service assistance to borrowers in need. However, for years, servicers put their own profits above borrower well-being by steering borrowers away from IDR plans and into costly deferments and forbearances.
For borrowers who did access IDR, servicers failed to track their progress toward cancellation. SBPC and our partners have extensively investigated and reported on these unlawful practices, which have been the subject of state and federal law enforcement actions. Today’s announcement by ED recognizes this sordid history and is an important step toward providing relief to borrowers.
Background
Starting in 1992, Congress has been promising federal student loan borrowers that Income-Driven Repayment (IDR) would make student debt affordable and finite and not a life-long burden. However, even despite continuous expansions of IDR, federal student loans have remained unaffordable for many, and delinquency and default have remained as prevalent as ever. This is especially true for Black, Latino/a, and low-income borrowers, who are less likely to successfully access IDR and thus remain very likely to face debilitating student loan costs—another thing IDR promised to eliminate.
In April 2022, the Administration announced the IDR Account Adjustment (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.
These long overdue changes come after years of work from advocacy organizations pushing the Administration to address IDR’s system-wide failures; the explosive 2021 report by SBPC and NCLC that found that despite millions of borrowers being in repayment for over 20 years, only 32 borrowers had ever received IDR cancellation; and a nationwide settlement against the servicing giant, Navient. The Administration’s new IDR plan—dubbed SAVE—addresses some of the key findings and mirrors several of the recommendations put forth in SBPC’s Improving & Delivering Relief IDR paper series as well as the executive actions outlined in SBPC and Demos’ Delivering on Debt Relief series, including the ways that runaway interest creates a debt trap for borrowers with negative consequences that ripple across borrowers’ financial lives.
While the IDR Adjustment offers an important lifeline to millions of borrowers, it is incomplete because it denies credit to those who have spent time in default and fails to resolve the underlying problems facing IDR.
In August 2022, alongside his announcement of up to $20,000 of student debt relief for federal student loan borrowers, President Biden promised to create a new IDR plan that capped undergraduates’ payments at 5 percent of their discretionary income. That announcement was preceded by the U.S. Department of Education’s Affordability and Student Loans negotiated rulemaking committee, which met between October 4, 2021, and December 10, 2021, to consider proposed regulations for the federal student financial aid programs, including IDR. That Committee did not reach a consensus on IDR.
Further Reading
SBPC and NCLC blog highlighting new revelations of mismanagement and abuse compromising the student loan safety net: Explosive New Evidence of Mismanagement of Student Loan Program Shows Need for IDR Waiver
SBPC blog on how Navient’s settlement with 39 state attorneys general shows system-wide breakdowns needing substantive IDR changes to fix: Navient’s Settlement Shows Why the Biden Administration Must Take Bold Action to Fix Income-Driven Repayment
SBPC, NCLC, and CRL IDR Waiver proposal to Biden Administration to fix broken IDR system: The System is Broken: 100+ Organizations Urge Biden Administration to Aid Millions of Student Loan Borrowers with Overdue Income-Driven Repayment (IDR) Reforms
December 2021 SBPC report: Revisiting Relief for Borrowers Waiting for Income-Driven Repayment
July 2022 130+ Group Letter to White House Urging Expansion of PSLF and IDR: Groups Push White House to Extend and Expand Access to Public Service Loan Forgiveness and Income-Driven Repayment Student Debt Relief Programs
SBPC statement in response to IDR Account-Adjustment announcement: Education Department Announces Major Effort to Repair Student Loan Safety Net, Deliver Debt Relief for Millions of Low-Income People with Student Debt
SBPC urges ED to improve IDR Account-Adjustment: Biden Administration’s Sweeping IDR Changes Will Provide Much-Needed Relief for Many, but Still Leave Behind Graduate and Parent PLUS Borrowers
April 2022 117 Organization Letter to Department of Education on IDR Waiver: 117 Organizations Urge Cardona to Restore the Promise of Income-Driven Repayment with Waiver Program
March 2021 SBPC and NCLC report: Education Department’s Decades-Old Debt Trap: How the Mismanagement of Income-Driven Repayment Locked Millions in Debt
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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.