On April 19th, the Department of Education (ED) announced sweeping changes to ensure federal student loan borrowers receive proper counseling and when eligible, loan forgiveness. The ED projects more than 3.6 million borrowers will benefit from these changes which include:
- An end to ‘Forbearance Steering’ or the practice of placing borrowers who are experiencing difficulty making payments into forbearance without counseling them about programs that may be more beneficial, like an income-driven repayment plan (IDR). It is estimated that from 2009 until 2020 at least 13% of federal loan borrowers have already used the maximum 36 months of forbearance. Federal Student Aid (FSA) will make a one-time account adjustment to allow borrowers who received 12 consecutive months or 36 cumulative months of forbearance to count those months toward earning forgiveness under both IDR and Public Service Loan Forgiveness (PSLF) as applicable. FSA will also increase oversight of its contracted servicers to ensure borrowers are receiving appropriate counseling.
- More accurate tracking of IDR payments by making a one-time account revision to address past inaccuracies and reforming the way FSA tracks IDR payments going forward.
- Reinstatement of the FSA Office of Enforcement and efforts to strengthen rules including borrower defense to repayment and gainful employment reporting to protect both borrowers and taxpayers.
Read the full announcement here.
In other student loan news, last month President Biden announced another extension of the student loan pause – this time through August 31. The ED says it is moving to pull millions of borrowers out of default before the pause ends allowing them to re-enter repayment in good standing.
Stay on top of all the latest student loan news with the Higher Education Assistance Group Blog.
Resources: https://www.cnbc.com/2022/04/06/biden-extends-payment-pause-on-federal-student-loans-until-september-.html, https://www.cnbc.com/2022/04/11/millions-of-student-loan-borrowers-in-default-are-getting-a-fresh-start-.html