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Press Press Releases Delaying the Income-Driven Repayment Rule is Further Evidence of a Dysfunctional Student Loan System

Delaying the Income-Driven Repayment Rule is Further Evidence of a Dysfunctional Student Loan System

July 22, 2022 | WASHINGTON, D.C. — Late yesterday, Politico reported that the U.S. Department of Education (ED) is delaying the release of its proposal to lower monthly payments for federal student loan borrowers and will “not finalize the income-driven repayment (IDR) plan until after a key Nov. 1 regulatory deadline.”  In acknowledgement of the failings of the existing IDR plans, the Department began the process of drafting new IDR regulations last fall. SBPC Policy Director and Managing Counsel Persis Yu served as a non-federal negotiator representing Legal Assistance Organizations that Represent Students and/or Borrowers during those negotiations.

In response, SBPC Policy Director and Managing Counsel Persis Yu issued the following statement:

Once again, distressed federal student loan borrowers are left waiting for President Biden to make good on his promise of delivering relief. Income-driven repayment (IDR) is meant to protect the lowest income borrowers and those experiencing financial hardship from the devastating impacts of default. Instead, IDR has trapped millions of borrowers in ballooning and inescapable debt. 

Failing to deliver a finalized IDR rule by November 1st means that borrowers will either need to wait another year for the promise of a truly affordable repayment option or imperil their financial wellbeing as the Department and its servicers — with their history of incompetence and abuse — rush to implement yet another repayment plan. 

Payments are set to resume in a little over a month. This delay is further evidence of a dysfunctional student loan system. The President must provide broad cancellation for all federal student loan borrowers, and the payment pause must be extended in coordination with the IDR Adjustment, the Public Service Loan Forgiveness (PSLF) Waiver, and new regulations. It is reckless and cruel to throw borrowers back into a broken student loan system.

Background

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). According to data provided by the U.S. Department of Education (ED) in 2021, over 4.4 million borrowers have been in repayment for 20 years or longer. Even though since 2016 it’s been possible to completely cancel student loans through IDR, following 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.

In April 2022, the Administration announced the IDR 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. 

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.

Additional Background Materials

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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.

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