Senate Democrats are calling for a probe of a federal student loan cancellation program to ensure that individuals paying $0 a month still qualify for forgiveness.
Senate Banking Committee Chairman Sherrod Brown, Ohio Democrat, sent a letter with two colleagues to the Consumer Financial Protection Bureau on the issue Friday. Mr. Brown authored the letter with Sen. Elizabeth Warren of Massachusetts and Senate Majority Whip Dick Durbin of Illinois.
In their letter, the senators urged the agency to undertake a full investigation into the way the Education Department and companies servicing student loans are handling income-driven repayment (IDR) plans.
“The loan servicers’ failure to responsibly manage IDR plans is evidenced by the low rate of cancellation … out of 4.4 million eligible borrowers, recent reports indicate that only 32 borrowers have ever had their student loans canceled,” the letter states.
Congress created IDR plans in 1992 to ensure low-income individuals were not overly burdened by federal student loan debt. The program allows borrowers to create a monthly repayment plan based on their income and familial responsibilities.
Generally, people with lower incomes pay less at first, with payments increasing over time if their income rises. After 20-25 years of paying down the loans, the Education Department is mandated to forgive the remainder of the loans.
A recent expose by NPR, however, revealed widespread mismanagement. According to the IDR program, borrowers making below 150% of the federal poverty line are allowed to make a monthly payment of $0 on their loans and have it count toward forgiveness.
Documents obtained by NPR including a 2016 review by the Education Department of the program found that some loan servicers were failing to properly track those payments.
Democrats say 48% of people enrolled in the IDR program meet the income eligibility criteria to pay $0 a month. They say that not tracking those payments properly could keep individuals from having their loans forgiven after the 20-to-25 year period.
“We urge the Consumer Financial Protection Bureau to investigate these reports,” the lawmakers wrote.