The White House is coming under increased pressure to fix a federal program that public policy groups and consumer rights advocates say has failed to help millions of low-income student borrowers pay back their loans as intended.
Now, the heads of the House and Senate education committees are urging the Education Department to overhaul the “broken” system of income-driven repayment plans, which they say has fallen woefully short of providing adequate debt relief and even promised loan cancellation.
“The Department of Education should repair the broken safety net for low-income borrowers by addressing past failures and establishing a new income-driven repayment plan that keeps payments affordable, prevents debts from ballooning over time, and provides a reliable pathway out of perpetual repayment ,” Sen. Patty Murray, D-Wash., and Rep. Bobby Scott, D-Va., wrote in a letter to Education Secretary Miguel Cardona and shared Monday with NBC News.
The letter was written in anticipation of the Education Department releasing proposed changes to how income-driven repayment plans would be administered.
Income-driven repayment was first introduced by Congress in the 1990s and allows borrowers to pay back their federal student loans based on their income and family size. More than 9 million borrowers are enrolled in the programs, according to federal student aid data.
President Joe Biden has come under mounting demands from members of his own party to overhaul income-driven repayment plans as the White House tackles the larger issue of student debt. His administration this month announced yet another extension of the payment pause on federal student loans — this time, through Aug. 31 — as concerns about inflation and rising gas prices roil the country.
A March report by the Brookings Institution, a public policy think tank, examined income-driven repayment and highlighted several lingering problems: Many borrowers who would benefit from the program are never told about it; they face “bureaucratic, technical, or legal difficulties” when they have to recertify their incomes; and some borrowers ultimately “do not make payments large enough to cover the accruing interest, so they see their balances grow over time.”
Student borrower groups also point to what they say are other failures of the program. Since 2016, only 32 borrowers have had their remaining loans canceled as permitted under the program because they made the required amount of payments for either 20 or 25 years — a tiny fraction compared to the 2 million borrowers who have been in repayment for 20 years of longer, advocacy groups have found.
An NPR investigation this month also reported that some federal student loan servicers weren’t counting how many payments borrowers were making under their income-driven repayment plans, as required, and failed to proactively notify borrowers when they qualified for loan cancellation.
In their letter, Murray and Scott asked the Education Department to extend the moratorium on federal student loan payments until 2023 and use the time to simplify the income-driven repayment process and “reduce borrower confusion and administrative complexity.”
The lawmakers also made several suggestions, including making the program available to all federal student loan borrowers, including parent and graduate borrowers, and protecting borrowers’ income equal to at least 250 percent of the federal poverty line so they can prioritize basic needs.
The Education Department did not immediately respond to the letter. The top-ranking Republicans in the House and Senate education committees also did not immediately respond to requests for comment about how they believe income-driven repayment plans could be overhauled.
Murray said because student borrowers are “trapped in repayment when they should actually be finished paying their loans,” the federal government needs to “right these past wrongs by making sure borrowers get the relief they are owed.”