Federal Student Aid: Education Needs to Take Steps to Ensure Eligible Loans Receive Income-Driven Repayment Forgiveness

GAO-22-103720 Published: Mar 21, 2022. Publicly Released: Apr 20, 2022.
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Fast Facts

To make student loans more affordable, income-driven repayment plans base monthly payments on a borrower's income and family size, and extend repayment periods. Borrowers in these plans are also eligible for forgiveness after 20 or 25 years of qualifying payments.

But the Department of Education has had trouble tracking borrowers' payments and hasn't done enough to ensure that all eligible borrowers receive the forgiveness to which they are entitled. We found thousands of borrowers still in repayment who could be eligible for forgiveness now.

Our recommendations address this and other issues.

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Highlights

What GAO Found

The Department of Education approved forgiveness for a total of 157 loans under Income-Driven Repayment (IDR) plans as of June 1, 2021, but has not taken the steps necessary to ensure that all eligible loans receive IDR forgiveness. IDR plans generally lower monthly payment amounts and extend repayment to 20 or 25 years of qualifying payments, after which borrowers become eligible for forgiveness of their remaining loan balances without needing to apply. However, GAO found that about 7,700 loans in repayment (about 11 percent of loans analyzed) could be potentially eligible for IDR forgiveness. Education's repayment data do not provide enough information to definitively determine why these loans—totaling about $49 million in outstanding debt—had not been forgiven as of September 1, 2020 (see figure). Education officials said data limitations make it difficult to track some qualifying payments and older loans are at higher risk for payment tracking errors. Until Education takes steps to address such errors, some borrowers may not receive the IDR forgiveness they are entitled. This risk will increase as Education data show loans potentially eligible for IDR forgiveness will climb to about 1.5 million loans by 2030.

Selected Outcomes for Loans in Repayment Long Enough to be Potentially Eligible for Income-Driven Repayment Forgiveness

Selected Outcomes for Loans in Repayment Long Enough to be Potentially Eligible for Income-Driven Repayment Forgiveness

GAO identified gaps in the information Education and its loan servicers provide to borrowers about IDR forgiveness.

  • Education does not provide information about the requirements for receiving IDR forgiveness, including what counts as a qualifying payment toward forgiveness, in key communications to IDR borrowers. Borrowers who do not receive this information may be unaware that months in forbearance and most types of deferment generally do not count. Additional information would help borrowers understand requirements for forgiveness.
  • Education and its servicers told GAO they do not provide regular updates to borrowers in IDR plans on the counts of qualifying payments made toward forgiveness unless borrowers request them. They also do not notify all borrowers about options to request and verify these counts. Providing this information is especially important given the risk of payment tracking errors.

Unless Education ensures borrowers are better informed about forgiveness requirements and qualifying payment counts, IDR borrowers may make uninformed decisions and be unable to correct inaccurate counts, potentially delaying forgiveness.

Why GAO Did This Study

About half of the more than $1 trillion in outstanding federal student Direct Loans are being repaid by borrowers using IDR plans. Some borrowers in IDR plans are now potentially eligible for forgiveness of their remaining loan balances after 20 or 25 years of payments. GAO was asked to review IDR forgiveness.

This report examines (1) how many loans have received IDR forgiveness and the extent to which Education ensures eligible loans receive forgiveness, and (2) the extent to which Education provides key information about IDR forgiveness to borrowers in IDR plans.

GAO analyzed Education data on IDR loans that had been in repayment long enough to be potentially eligible for IDR forgiveness as of September 1, 2020, and data on loans forgiven as of June 1, 2021, the most recent data available. In addition, GAO interviewed Education and loan servicer officials, and reviewed documents from all nine servicers operating in 2020, Education requirements, and relevant federal laws and regulations.

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Recommendations

GAO is making five recommendations to Education, including that Education take steps to identify and address payment tracking errors, and ensure borrowers receive additional information about requirements for forgiveness and counts of qualifying payments. Education agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Federal Student Aid The Chief Operating Officer of Federal Student Aid should develop and implement procedures to identify loans that are at higher risk of having payment tracking errors for Income-Driven Repayment loan forgiveness, and take steps to ensure that eligible borrowers with such loans receive timely forgiveness. These steps could include procedures for verifying and correcting payment counts or other actions to address any potential errors that could affect forgiveness for these higher-risk loans. (Recommendation 1)
Open
Education agreed with this recommendation and identified steps it plans to take to implement it. In April 2022, Education announced plans to conduct a one-time revision of IDR payment counters to address past inaccuracies and permanently fix payment counting going forward. As part of this effort, Education reported that it would automatically forgive the remaining balances on loans that have accumulated time in repayment of at least 20 or 25 years. Education also announced that, for remaining IDR loans, it would make a one-time IDR payment count revision by July 2023 wherein some additional months would qualify towards forgiveness, including for certain loan statuses that our report identified as being hard to accurately track in the past. In September 2022, Education reported that it is in the process of directing its student loan servicers to correct inaccurate payment counts and discharge loans that are identified as eligible for forgiveness. Education said it anticipates starting to discharge those loans by the end of 2022. In addition to issuing new guidance to student loan servicers to ensure accurate and uniform payment counting practices, Education plans to track payment counts in its own modernized data systems. To implement this recommendation, Education needs to complete these efforts and demonstrate that they ensure loans at higher risk of payment tracking errors are identified and potential errors that could affect forgiveness are addressed.
Office of Federal Student Aid The Chief Operating Officer of Federal Student Aid should ensure additional information about IDR forgiveness rules and requirements, including what counts as a qualifying payment toward forgiveness, is included in key communications to borrowers enrolled in IDR plans. Education could provide this information to borrowers or could direct servicers to provide it. (Recommendation 2)
Open
Education agreed with this recommendation and identified steps it plans to take to implement it. In September 2022, Education reported that it planned to update communications to borrowers sent by the Department and loan servicers so borrowers can learn how to check their progress toward forgiveness and to include adequate information about program rules and requirements. Education stated that it is reviewing key documents and information sources, such as the IDR application, approval, and annual notification forms and online resources like StudentAid.gov, to ensure they are communicating crucial information on these issues to borrowers. Education also stated that, as part of ongoing negotiated rulemaking, it will consider changing some of the requirements regarding what is considered a qualifying payment, noting that clarifying the regulations could make it easier for borrowers to understand which payments will count. GAO will close this recommendation when Education demonstrates that it has completed its efforts to update key documents and information sources with additional information about IDR forgiveness rules and requirements.
Office of Federal Student Aid The Chief Operating Officer of Federal Student Aid should ensure IDR borrowers are regularly notified about the option to request their counts of qualifying payments toward IDR forgiveness and the option to request verification of those counts if needed. Education could provide this information to borrowers or could direct servicers to provide it. (Recommendation 3)
Open
Education agreed with this recommendation and identified steps it plans to take to implement it. Specifically, Education said it will make clear on its website and in other communications how borrowers can request reviews of their payment counts both through their loan servicer and with the FSA Ombudsman. In September 2022, Education reported that it is enhancing its online tools so borrowers can view their IDR payment counts at their discretion throughout their repayment lifecycle. As Education moves forward with its plans, it will be important to explain to borrowers (through the online tools or another method) how they may request verification of these counts.
Office of Federal Student Aid The Chief Operating Officer of Federal Student Aid should develop and implement procedures for verifying counts of qualifying payments toward IDR forgiveness when requested by borrowers so that any inaccuracies can be corrected. (Recommendation 4)
Open
Education agreed with this recommendation and identified steps it plans to take to implement it. In September 2022, Education reported that they are developing and implementing procedures to identify and correct payment counts for loans at greater risk of error. As Education moves forward with these plans, it will be important to ensure that such procedures are also in place to guide verification efforts when borrowers request verification of their qualifying payments.
Office of Federal Student Aid The Chief Operating Officer of Federal Student Aid should ensure regular updates on counts of qualifying payments toward IDR forgiveness are provided to, at a minimum, IDR borrowers who did not have loans serviced by Education's original loan servicer for the Direct Loan program. (Recommendation 5)
Open
Education agreed with this recommendation and identified steps it plans to take to implement it. In September 2022, Education reported that it is enhancing its web tools so all borrowers can view their IDR payment counts at their discretion throughout their repayment lifecycle. GAO will close this recommendation when Education demonstrates that it has completed these efforts.

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