US Education Dept. amends the student loans programs

On Tuesday, the US Education Department announced improvements to several student loan programmes, providing immediate relief to thousands of borrowers and moving millions more years closer to having their student debts cancelled. It comes as the Biden administration considers eliminating millions of Americans' student loan debt.

The Public Service Loan Forgiveness programmes and the Income-Driven Repayment plans will be altered. The improvements, according to the Education Department, will grant immediate relief to 40,000 borrowers and bring at least 3.6 million debtors closer to relief by at least three years through income-driven repayments.

According to an investigation by the Federal Student Aid Office, some servicers were placing borrowers in forbearance who were having financial issues in violation of requirements requiring borrowers to get clear, accurate information about their alternatives for staying out of arrears. According to the Education Department, this occurred even when monthly payments under income-driven repayment plans might have been as low as zero dollars.

To address the problem, the Education Department will make a one-time account change that will allow certain long-term forbearances to be included toward income-driven and public service forgiveness. Later this year, the modifications will be implemented automatically to borrowers' accounts.

Borrowers who were put on shorter-term forbearances will be able to request account reviews as well. Simultaneously, the government would tighten monitoring of servicers' ability to enrol borrowers in forbearance, including collaborating with the Consumer Financial Protection Bureau to conduct frequent audits of forbearance use.

Meanwhile, the Education Department discovered "serious vulnerabilities" in the income-driven repayment programme, implying that borrowers were missing out on making progress toward forgiveness.

The Federal Student Aid office will make a one-time adjustment to the income-driven payments, so that every month a borrower makes payments will count toward forgiveness, regardless of which repayment plan they are on. Payments made before the debt consolidation are included. Those who have made the required number of payments — usually 120 — will eventually be cancelled.

The White House also announced earlier this month that the federal student loan payment will be extended until August 31. Jen Psaki, the White House press secretary, recently stated that the administration will make a decision on eliminating student loan debt between now and then, or it would be prolonged further.