- ORIGINAL NEWS
After student loan forgiveness, the Education Dept. is sending some borrowers refunds. What to know
- SUMMARY
The Biden administration has forgiven student debt for millions of people and some have also received large refunds.
The government is reviewing accounts of borrowers who have been paying federal student loans for a decade or more to identify those eligible for forgiveness.
Confusing rules and lender mismanagement have caused many to miss out on the relief before.
So far, 3.9 million borrowers have had their debt erased, totaling $138 billion in relief.
About 300,000 people may be eligible for refunds too.
Under the U.S. Department of Education’s income-driven repayment plans, borrowers are entitled to have any remaining debt forgiven after 20 or 25 years.
However, many continue making payments long after that due to financial disincentives for servicers to inform consumers about the program.
The Education Department is now reviewing payments and canceling debt for those eligible.
It’s also refunding borrowers for payments made after they were eligible for cancellation.
The Public Service Loan Forgiveness program allows government and nonprofit employees to have their federal student loans canceled after 10 years or 120 payments.
This program has also had issues, and many who apply don’t receive forgiveness.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“Marlon Fox, a chiropractor in North Charleston, South Carolina, got his student debt forgiven last year, he was thrilled.”
“His $119,500 balance was reset to zero.”
“So far, almost 3.9 million borrowers have gotten their education debt erased, totaling $138 billion in relief.”
“As many as 300,000 people may be eligible for refunds, too, according to an estimate by higher education expert Mark Kantrowitz.”
“Karen Tongson, a professor at the University of Southern California, got her debt forgiven and was refunded $20,000 by the Education Department.”
Negative
“But the good news didn’t end there. Just two months later, the U.S. Department of Education also refunded him $56,801.”
“The Education Department has a number of programs that lead to loan cancellation, but many borrowers have missed out on the relief because of confusing rules and lender mismanagement, advocates say.”
“Under the U.S. Department of Education’s income-driven repayment plans, student loan borrowers are entitled to get any of their remaining debt forgiven after 20 or 25 years.”
“Yet many are stuck making payments long after that period.”
“This is due, in part, to strong financial disincentives for student loan servicers to inform consumers about the program and their ability to qualify for it,” said Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending.”
“The Education Department contracts with different companies to service its federal student loans, including Mohela, Nelnet and Edfinancial, and pays them more than $1 billion a year to do so.”
“The companies earn a fee per borrower per month, which advocates say discourages transparency around loan forgiveness opportunities.”
“More from Personal Finance:New student loan payment plan may help borrowers become homeowners”