We found problems with a student loan program. Now, senators are calling for changes

Lawmakers have called for an investigation into a troubled student loan cancellation program two weeks after an NPR report revealed the program — designed to help low-income borrowers, and eventually offer them debt cancellation — wasn't living up to its promise.

More than 9 million borrowers are currently enrolled in income-driven repayment (IDR) plans, which are designed to help people who cannot afford to make large monthly payments. The plans promise loan cancellation after 20-25 years. But documents obtained by NPR offer striking evidence that these plans have been badly mismanaged by loan servicers and the U.S. Department of Education.

The documents shed new light on the 2021 revelation that, at the time, 4.4 million borrowers had been repaying for at least 20 years but only 32 had had loans canceled under IDR.

"A recent NPR investigative report found the IDR program is riddled with problems and mismanagement, even worse than the public previously understood, resulting in millions of borrowers becoming unable to obtain debt cancellation," a group of Democratic lawmakers wrote in a letter sent Thursday to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra.

Sen. Sherrod Brown of Ohio, Sen. Elizabeth Warren of Massachusetts and Sen. Dick Durbin of Illinois signed onto the letter, which calls for CFPB to "investigate these reports and use all of its authorities to ensure borrowers are accessing IDR program benefits and receive the student loan forgiveness they have earned."

The senators also sent a letter Thursday to U.S. Education Secretary Miguel Cardona, calling for his agency to take action.

"We urge the Department of Education ('ED') to implement an IDR waiver, similar to the ongoing waiver for the Public Service Loan Forgiveness ('PSLF') program, to allow borrowers to access the loan forgiveness they were promised through IDR," the letter says.

These senators aren't alone in their support of an IDR waiver. Earlier this year, more than 100 different advocacy groups cosigned a letter to Cardona demanding a waiver that would retroactively loosen the program's rules.

The problems NPR found with IDR

Under IDR, a monthly payment of $0 for a borrower earning less than 150% of the federal poverty line should still count toward loan cancellation. But NPR obtained a previously unreleased 2016 review of servicers, conducted by the Education Department's office of Federal Student Aid, in which officials warned these $0 IDR payments "are not adequately tracked."

Nearly half of all IDR borrowers are making $0 monthly payments, according to a 2019 analysis by the Center for American Progress (CAP). Not tracking those payments could delay or derail millions of the lowest-income borrowers on their way to loan cancellation.

The documents NPR obtained also revealed other irregularities in how servicers count IDR payments.

For example, if a monthly payment of $100.01 is owed but a borrower pays just $100 — one penny shy of the required amount — three loan servicers said they would still count it as a qualifying payment. But four others indicated they would not.

In response to NPR's original investigation, the Department of Education said, "Borrowers place their trust in us to make sure these plans work the way they were intended to, and we intend to honor that trust. We are aware of historical issues with prior processes that had undermined accurate tracking of eligible payments. The current situation is unacceptable and we are committed to addressing those issues."

What's next for IDR

Implementing an IDR waiver could help put qualifying borrowers back on the path to loan cancellation. But not everyone believes the remedy should fall solely to the Department of Education.

Beth Akers, who studies student loans at the conservative-leaning American Enterprise Institute (AEI), told NPR she supports the idea of IDR – but she blames lawmakers for creating such a difficult suite of programs to implement.

"We're not going to get these programs cleaned up without legislation," Akers said. "The servicers have a thankless job. So does the Department of Education, because they were handed a pile of garbage."

NPR reached out to the CFPB and the Education Department for comment on the letters, and will update this story with their responses. [Copyright 2022 NPR]