More than 800,000 borrowers are eligible to benefit from student loan forgiveness

SCOTT SIMON, HOST:

Two weeks to the day after the U.S. Supreme Court shut down President Biden's student loan relief program, the Education Department announced some surprising big news Friday. It said it would erase the debts of more than 800,000 borrowers. It's part of a promise the administration made last year, in part in response to an NPR investigation. NPR's Cory Turner led that investigation and joins us. Cory, thanks so much for being with us.

CORY TURNER, BYLINE: Thanks for having me on, Scott.

SIMON: So convince me that this is somehow not related to the Supreme Court fight.

TURNER: I know. The timing's weird. It's weird. It surprised me, too. And it is confusing.

But no, this has been in the works since April of 2022. It has been on a completely separate track. This relief is also real. It is happening imminently. It affects some of the oldest loans and some of the oldest borrowers in the system, Scott. And that's because by definition, folks who are going to get this relief have had loans for at least 20 years.

And one more thing here while we're talking about the court - this move is not going to be vulnerable to a court challenge the way Biden's broader program was. And that is because this is essentially the Ed Department trying to fix years of pretty serious mistakes with the loan program.

SIMON: Help us understand those mistakes that affected these 800,000 borrowers.

TURNER: Sure. Well, it all has to do with what was really meant to be the safety net of the federal student loan program for low-income borrowers. It's a suite of repayment plans that peg monthly payments to borrowers' income. So folks who don't make very much don't pay very much. They can even qualify for a zero-dollar monthly payment. And these income-driven repayment plans - they're called IDR plans - have for years made one really big promise to borrowers, and that is if they make these monthly payments for 20 years, the government would forgive whatever debt is left over after that.

Here's the problem, Scott. Borrowers were spending 20 years or more in the system, but nobody was getting forgiveness. There was this incredible review from borrower advocates, came out in March of 2021. It found that some 4 million borrowers had been in the loan system for at least two decades, and yet just 32 - that is a 3-2, Scott - had gotten loan forgiveness through one of these IDR plans.

SIMON: Thirty-two? How is that possible?

TURNER: Well, it's possible because these plans didn't have one problem. They had all of the problems. So first, for years when low-income borrowers would call their loan servicer and say, help, I can't afford my monthly payment, servicers instead put millions of borrowers into forbearance when they could have put them in these IDR plans. Forbearance means payments are paused, but interest keeps building and building, Scott. It is not good.

And then last April, 2022, NPR published an investigation that I did around a bunch of leaked Ed Department documents that showed even more problems and that the department knew about them. So several loan servicers weren't keeping track of borrower payments. That means even if a borrower did reach 20 years and technically qualified for forgiveness, the servicer didn't know it. And then one of the strangest things that I found was that the record system that Ed and its servicers use is so bad that when a borrower is transferred from one servicer to another, which happens a lot, their payment history can get cut off or lost.

The Ed Department called our findings unacceptable. They quickly pledged to do a one-time review of millions of borrower accounts. And that, Scott, is basically what we're seeing now - the department giving this retroactive credit to borrowers towards loan forgiveness to the tune of $39 billion. And there is more to come too.

SIMON: More to come - how so?

TURNER: Yeah. These 800,000 borrowers are just the beginning. This account adjustment - that's what the department calls it - is going to last into 2024. So stay tuned. Both the cost and the number of borrowers helped are both guaranteed to grow.

SIMON: NPR's Cory Turner. Thanks so much.

TURNER: You're welcome. Transcript provided by NPR, Copyright NPR.