Democrats call for inquiry to ensure people who pay $0 on student loans are eligible for debt forgiveness
Senate Democrats are calling for an investigation into a federal student loan forgiveness program to ensure people who pay $0 a month still qualify for a rebate.
Senate Banking Committee Chairman Sherrod Brown, an Ohio Democrat, sent a letter along with two colleagues to the Consumer Financial Protection Bureau on the issue on Friday. Mr. Brown drafted the letter with Senator Elizabeth Warren of Massachusetts and Senate Majority Whip Dick Durbin of Illinois.
In their letter, the senators urged the agency to undertake a thorough investigation into how the Department of Education and companies that service student loans handle income-contingent repayment (IDR) plans.
“The inability of loan managers to responsibly manage IDR plans is evidenced by the low cancellation rate…out of 4.4 million eligible borrowers, recent reports indicate that only 32 borrowers saw their loan canceled student,” the letter read.
Congress created IDR plans in 1992 to ensure that low-income people were not burdened too much with federal student loan debt. The program allows borrowers to create a monthly repayment plan based on their income and family responsibilities.
Typically, low-income people pay less at first, with payments increasing over time as their income increases. After 20 to 25 years of loan repayment, the Ministry of Education is mandated to cancel the rest of the loans.
A recent NPR expose, however, revealed widespread mismanagement. Under the IDR program, borrowers with an income below 150% of the federal poverty level are allowed to make a $0 monthly payment on their loans and have it count toward forgiveness.
Documents obtained by NPR, including a 2016 Department of Education review of the program, found that some loan managers were not tracking these payments properly.
Democrats say 48% of people enrolled in the IDR program meet the income eligibility criteria to pay $0 a month. They say failing to track these payments properly could prevent individuals from having their loans canceled after the 20-25 year period.
“We urge the Consumer Financial Protection Bureau to investigate these reports,” the lawmakers wrote.