Federal repayment plans adjust monthly payments based on income and family size and extend repayment periods. Debts are eligible for forgiveness after 10, 20 or 25 years of payments. About 30% of all borrowers with federal loans participate in such a program, and more borrowers could benefit from participating in just one.
But reimbursement programs have a poor track record. Not so long ago, 98% of people who requested cancellation of their debts had their request rejected. A Government Accountability Office report released in March found that millions of dollars in student debt could already have been forgiven if the programs had been administered correctly. Richard Cordray, chief operating officer of Federal Student Aid, an agency of the Department of Education, called the failure “truly inexcusable”.
The Department of Education has worked to fix these programs by retroactively giving qualified borrowers more credit for time spent in public service and going through a backlog of paperwork, but it could do more. Additional changes to income-based repayment programs — such as reducing interest payments, lowering eligibility criteria, and making canceled student loan debt tax-free — could have an effect, according to a Pew report. significant impacts over time. Congress and the Department of Education should consider such changes as part of a more lasting solution to the debt problem.
Lawmakers should also consider making it easier to forgive student loans through bankruptcy, a relief measure available for credit card and mortgage debt. Changes to bankruptcy law in 2005 also made these protections less accessible.
The Department of Education has launched a long-awaited crackdown on predatory schools, another major source of student loan defaults. The Obama administration tightened rules on for-profit schools, but the Trump administration’s Education Department, under Betsy DeVos, relaxed those rules and let reimbursement and forgiveness programs atrophy. Last month, the department discharged $238 million in debts held by 28,000 people who attended Marinello Beauty Schools, which closed in 2016. The school engaged in “pervasive and widespread misconduct “, revealed a department investigation.
Since 2021, the Biden administration has approved more than $18.5 billion in loan discharges for more than 750,000 borrowers, including $6.8 billion for 113,000 people under the Bank’s loan forgiveness program. public service and $8.5 billion for more than 400,000 borrowers with total and permanent disabilities. The administration is also pushing to double the maximum Pell Grant and restore a rule that holds schools accountable for the paid employment of their graduates — a measure aimed at for-profit colleges.
These measures are all positive, tackling the student debt crisis with policies that are both compassionate and just.