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# Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs 

# Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs 

April 19, 2022

**Contact:  **press@ed.gov

                                    -  	More Resources	en español      
Today, the Department of Education  announced steps that will bring borrowers closer to public service loan and  income-driven repayment (IDR) forgiveness by addressing historical failures in  the administration of the federal student loan programs. Federal Student Aid  (FSA) estimates that these changes will result in immediate debt cancellation  for at least 40,000 borrowers under the Public Service Loan Forgiveness (PSLF)  Program. Several thousand borrowers with older loans will also receive  forgiveness through IDR. More than 3.6 million borrowers will also receive at  least three years of additional credit toward IDR forgiveness.

“Student loans were never meant to be a  life sentence, but it’s certainly felt that way for borrowers locked out of  debt relief they’re eligible for,” said U.S. Secretary of Education Miguel  Cardona. “Today, the Department of Education will begin to remedy years of  administrative failures that effectively denied the promise of loan forgiveness  to certain borrowers enrolled in IDR plans. These actions once again  demonstrate the Biden-Harris administration’s commitment to delivering  meaningful debt relief and ensuring federal student loan programs are  administered fairly and effectively.”

These actions are part of the Department’s  commitment to address historical failures in the administration of the federal  student loan program and support student loan borrowers through the pandemic.  They also help address the impact of the COVID-19 pandemic on borrowers with  lower incomes and high debt loads. Today’s steps will help restore the promise  of IDR plans by ensuring that borrowers have an affordable and effective path  out of debt.

Beyond the immediate corrective actions  announced today that will provide relief to borrowers harmed in the past, FSA  will take action to ensure that borrowers receive these benefits in the future.  Below are the actions being taken today.

**Ending “Forbearance Steering”**

Department regulations require that  borrowers who are facing difficulty making their loan payments get clear and  accurate information from servicers about their options for staying out of  delinquency, including IDR plans, and the financial consequences of choosing  short-term options like forbearance. However, FSA reviews suggest that loan  servicers placed borrowers into forbearance in violation of Department rules,  even when their monthly payment under an IDR plan could have been as low as  zero dollars. These findings are consistent with concerns raised by the  Consumer Financial Protection Bureau and state attorneys general. A borrower  advised to choose an IDR plan instead of forbearance can get a reduced payment,  stay in good standing, and make progress toward loan forgiveness. A borrower  advised to choose forbearance – particularly long-term consecutive or serial  uses of forbearance – can see their loan balance and monthly payments grow due  to interest capitalization and lead to delinquency or default.

The Department will address forbearance  steering by:
- Conducting a One-Time Account  Adjustment to Count Certain Long-Term Forbearances toward IDR and PSLF Forgiveness

Borrowers steered or inappropriately  placed into long-term forbearances miss out on critical progress toward IDR and  PSLF forgiveness; this can set them back years. The Department’s regulations  and servicer contracts have safeguards, including a 12-month limit for any  single use of forbearance, and a 36-month cumulative limit on discretionary  forbearance. A review of past forbearance use shows that long-term use of  forbearance was remarkably widespread. More than 13% of all Direct Loan  borrowers between July 2009 and March 2020 have used forbearance for at least  36 months cumulatively. These changes will be applied automatically to  borrowers’ accounts later this year. To mitigate the harms of inappropriate  steering into long-term forbearance, FSA will conduct a one-time account  adjustment that will count forbearances of more than 12 months consecutive and  more than 36 months cumulative toward forgiveness under IDR and PSLF. Borrowers  who were steered into shorter-term forbearances will be able to seek account  review by filing a complaint with the FSA Ombudsman at StudentAid.gov/feedback.
- Increasing Oversight of  Servicers’ Forbearance Use

FSA will target forbearance steering by  restricting servicers’ ability to enroll borrowers in forbearance by text or  email, conducting an external review of patterns of forbearance use and  servicers’ practices to identify other potential changes to address steering,  and working in partnership with the Consumer Financial Protection Bureau to do  regular audits of forbearance use. This will build upon other FSA efforts to  improve oversight of loan servicing activities, including stronger  accountability provisions in servicing contracts, renewing partnerships with federal and state  regulators and clarifying its position on federal preemption of state oversight of loan  servicing.

FSA will begin implementing these changes  immediately, but borrowers may not see the effect in their accounts until the  last quarter of 2022.

**Tracking Progress Toward IDR Forgiveness**

IDR plans offer substantially lower  monthly payments for most borrowers. Borrowers on most plans are entitled to  forgiveness after 20 years of payments and depend on FSA and its servicers to  accurately track their progress toward relief. However, the Department’s review of IDR payment-tracking procedures has revealed significant flaws that suggest  borrowers are missing out on progress toward IDR forgiveness.

The Department is committed to fixing this  problem swiftly and permanently. Secretary Cardona has directed FSA to:
- Conduct a One-Time Revision of  IDR Payments to Address Past Inaccuracies

To fully address past issues with IDR  payment counting, FSA will do a one-time revision of IDR-qualifying payments  for all Direct Student Loans and federally-managed Federal Family Education  Loan Program (FFEL) loans. Any months in which borrowers made payments will  count toward IDR, regardless of repayment plan. Payments made prior to  consolidation on consolidated loans will also count. This fix is necessary to  correct for data problems and past implementation inaccuracies. Any borrower  who has made the required number of payments for IDR forgiveness based on this  payment-count revision will receive loan cancellation automatically.  Additionally, FSA will count months spent in deferment prior to 2013 toward IDR  forgiveness (with the exception of in-school deferment) for this same  population of borrowers to address concerns that, prior to that date, its data  cannot distinguish IDR-eligible deferments from other deferments.
- Permanently Fix IDR Payment  Counting by Reforming FSA's IDR Tracking

Borrowers should be able to rely on FSA  and its loan servicers to keep accurate records of their progress toward  forgiveness through IDR plans. FSA will issue new guidance to student loan  servicers to ensure accurate and uniform payment counting practices, and it  will track payment counts in its own modernized data systems. In 2023, FSA will  begin displaying IDR payment counts on StudentAid.gov so borrowers can view their  progress after logging into their accounts. In addition, the Department plans  to revise the terms of IDR through rulemaking to further simplify payment  counting by allowing more loan statuses to count toward IDR forgiveness,  including certain types of deferments and forbearances.

FSA will begin implementing these changes  immediately, but borrowers may not see the effect in their accounts until the  last quarter of 2022.

**Tackling Student Debt**

From Day One, the Biden-Harris  Administration has been committed to making student loan relief programs work  for everyone, including by addressing failures that deny borrowers the benefits  they earned. Efforts to revise IDR regulations will produce substantially more  affordable monthly payments for millions of borrowers. Today’s actions  complement steps the Administration has already taken within its first year to  cancel more than $17 billion in debt for 725,000 borrowers in addition to  extending the student loan payment pause, saving 41 million borrowers billions of  dollars in payments each month. The Department has now approved approximately:
- $6.8 billion for more than 113,000 public servants through improvements to PSLF;
- $7.8 billion for more than 400,000 borrowers who have a total and permanent disability;
- $1.2 billion for borrowers who attended ITT Technical Institutes before it closed; and
- Nearly $2 billion to 105,000 borrowers who were defrauded by their school.

To make college more affordable for  current and future students, President Biden has called for and Congress has  included in bipartisan legislation a $400 increase in the maximum Federal Pell  Grant—the largest increase in the maximum award in over a decade.

To protect students and taxpayers from  predatory or low-value colleges, the Department has also restored the FSA  Office of Enforcement and started efforts to strengthen key rules including  borrower defense to repayment and gainful employment.
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