What’s Going on with Income Driven Repayment and Student Loans?
Following a report that student loan servicers are mismanaging the Income Driven Repayment (IDR) program for federal student loans — resulting in borrowers paying much more than they should — a group of U.S. Senators sent a letter to the Consumer Financial Protection Bureau (CFPB) calling for an investigation into loan servicers.
The move comes after the CFPB fined loan servicer Edfinancial for misleading borrowers.
Senators Sherrod Brown of Ohio, Dick Durbing of Illinois, and Elizabeth Warren of Massachusetts issued the letter in which they decried the mismanagement of this key program designed to help borrowers manage repayment of student loans.
In the letter, the Senators said:
A recent NPR investigative report found the IDR program is riddled with problems and mismanagement, even worse than the public previously understood, resulting in millions of borrowers becoming unable to obtain debt cancellation. According to the report, loan servicers have severely mismanaged IDR plans for decades, including by failing to properly count qualifying IDR payments and not accurately tracking borrowers’ progress towards cancellation. The report also revealed servicers did not “adequately track,” $0 monthly payments that qualify towards loan forgiveness. Since only borrowers earning less than 150% of the federal poverty line can make $0 qualifying payments and 48% of IDR borrowers have $0 monthly payments, the servicers’ mismanagement is harming the lowest-income borrowers the most.
The same group of three Senators has joined calls for President Biden to cancel student debt and has recently lobbied the Biden Administration on the issue, resulting in a pause on repayments of federally held student loans.
Originally published at https://original.newsbreak.com.