- An NPR investigation found income-driven repayment plans are more flawed than previously known.
- Three student-loan companies didn't track borrowers' payments, throwing them off the forgiveness track.
- Low-income borrowers making $0 payments were hurt the most by the plan's failure, NPR said.
The failure of student-loan repayment plans based on income is no secret, but a new investigation from NPR revealed the flaws with those plans are much worse than anyone had thought.
Income-driven repayment plans (IDR) are intended to give borrowers affordable debt payments by creating a monthly student-loan payment plan based on a borrower's income and family size. It promises loan forgiveness after 20-25 years on the plan. But to date, only 32 borrowers — total — have ever qualified for full forgiveness, and NPR's Cory Turner dug into why exactly that is.
His findings were stark. According to internal documents from a 2016 review obtained by NPR, three student-loan companies — PHEAA, CornerStone, and MOHELA — were not tracking payments borrowers made for their IDR plans, meaning that borrowers would have to ask the company — whose job it was to track their payments — to do a "labor-intensive records review" to determine whether the borrower qualified for any loan forgiveness.
CornerStone ended its federal contract in 2020, and MOHELA and PHEAA did not immediately respond to Insider's request for comment.
Additionally, Turner found that low-income borrowers are being hurt the most by mismanagement of IDR plans. While the plans allow borrowers to make $0 monthly payments that count toward loan forgiveness progress, the internal documents revealed those payments were not being "adequately tracked."
"We knew there was a problem," Rep. Bobby Scott, the top Democrat on the House education committee, told NPR. "This is worse than we expected."
According to Education Department data, 4.4 million borrowers on IDR plans have been in repayment for 20 years or longer, and flaws with the plans have kept the vast majority of those borrowers stuck paying off debt they might not even owe. Insider reported in December that President Joe Biden announced reforms to IDR, like temporarily cutting paperwork requirements in the applications, but some lawmakers have said permanent solutions are required to deliver meaningful relief to borrowers.
In response to NPR's findings, Chair of the Senate education committee Patty Murray said in a statement that IDR plans "should be a lifeline that allow borrowers to work towards real relief—but it's now clearer than ever that these plans have failed to provide a reliable pathway to the relief that millions of borrowers have been diligently working toward."
"This is an urgent problem in need of real solutions: we need one workable IDR plan for all borrowers, and we need to ensure those who have been trapped in repayment for more than 20 years get the debt relief they are owed," she added.
Some Republican lawmakers agree with Murray that borrowers need better loan repayment plans. But the over two-year pause on student-loan payments is set to end in less than a month on May 1, and while Democrats like Murray want to see the student-loan industry, and its programs, fixed before payments are set to resume, Republicans do not want to see an extension of broad relief.
"The Biden administration owes Congress and the American people a plan that will address challenges facing student loan servicing companies and borrower confusion, and provide a clear timeline for when student loan payments will resume," Rep. Virginia Foxx, top Republican on the House education committee, previously said.
"President Biden's latest extension is a troubling trend toward blanket student loan forgiveness, which would be a massive mistake, with major consequences for borrowers and taxpayers," she added.
An Education Department spokesperson told NPR that the department is "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."