04.18.22

Scott, Murray Push Biden Administration to Fix Longstanding Failures with Income-Driven Student Loan Repayment System

WASHINGTON – U.S. Representative Bobby Scott (D-VA-03), Chair of the House Education and Labor Committee, and U.S. Senator Patty Murray (D-WA), Chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, wrote to U.S. Education Secretary Miguel Cardona to urge the Department of Education to extend the student loan payment pause until 2023 and use the intervening time to adopt meaningful and lasting reforms to the federal income-driven repayment (IDR) system—by finalizing a new, more generous IDR plan that is available to all federal student loan borrowers, and by correcting past harms by implementing a retroactive payment correction that delivers on the promise of loan relief for those enrolled in IDR. The letter comes after a recent NPR investigation showed how the IDR system is failing the more than 9 million borrowers currently enrolled in IDR plans, by failing to ensure qualifying payments they have made arecounted towards forgiveness.

“We commend your efforts to expand relief to defrauded borrowers, make good on the promises made to public servants, and provide struggling borrowers with a fresh start. We were also glad to see the payment and interest pause extended through August 31, 2022,” wrote the Chairs of the House and Senate Education Committees. “However, we strongly believe further action is needed. We urge you to extend this essential relief through at least the end of the year due to the economic fallout of the pandemic, using the intervening time to finalize and implement a comprehensive approach to student loan relief—because no borrower should have to resume payment until you make critical and urgently needed reforms to fix our student loan system. To provide meaningful, lasting relief, this comprehensive approach must include critical changes to income-driven repayment (IDR).”

In the letter, Chairs Scott and Murray pushed the Department of Education to go further than their proposed IDR regulation to address longstanding issues plaguing the student loan system and to allow borrowers to easily access affordable payments and a reliable pathway out of debt. Specifically, they urged the Department to create a new, more generous IDR plan that is available to all federal student loan borrowers—including parent and graduate borrowers—and protects income equal to at least 250 percent of the poverty line so borrowers can meet basic needs, like paying rent or putting food on the table. They also urged the Administration to finally sunset existing IDR plans to end decades of borrower confusion. They made clear that the new IDR plan must fully eliminate negative amortization—or the growth of a total loan balance that occurs when interest exceeds monthly payments—which particularly harms Black borrowers, and must address harmful student loan servicer practices of “steering” borrowers towards forbearance—and thus delaying their discharges—by counting periods of deferment and forbearance towards IDR loan discharge.

Chairs Scott and Murray also made clear that, in addition to finalizing a new IDR plan, the Department must undo past harms already felt by borrowers across the country by immediately implementing a retroactive IDR payment correction: “Borrowers have for too long, lived with ballooning debts and the false promise of loan forgiveness after 20 or 25 years in income-driven repayment. Payments must be corrected retroactively in order to provide relief to borrowers who have already been harmed by this broken safety net.”

NPR’s recent report has shown that because of failures by servicers to track payments and paperwork errors during loan transfers, borrowers are being denied IDR discharges even after decades of repayment. In particular, borrowers with low incomes who are eligible for zero-dollar payments have not had those payments adequately tracked—and have been trapped in repayment. Chairs Scott and Murray demanded the Department address this failure by issuing a retroactive IDR payment correction that should, at a minimum:

  • Count all months that a borrower has been in repayment as qualifying months toward IDR discharge regardless of payment plan, loan type, prior default or delinquency, or time spent in deferment or forbearance;
  • Provide—to the greatest extent possible—automatic benefits to borrowers who have been harmed; and
  • Give borrowers who may need to consolidate their loans to access discharge a minimum of one year to take the steps necessary to become eligible.

For the full text of the letter, click here.

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