(CTN News) – The student loan of Marlon Fox, a chiropractor in North Charleston, South Carolina, was forgiven last year. A zero balance was applied to his $119,500 balance.
There was more good news to come. Within two months, the Education Department also refunded him $56,801.
In an effort to identify those eligible for forgiveness, the government is reviewing the federal student loan accounts of borrowers who have made payments for a decade or more. There are a number of loan cancellation programs available through the Education Department, but many borrowers have not taken advantage of them because of confusing rules and mismanagement by lenders, say advocates.
There have been nearly 3.9 million borrowers who have had their education debt erased, resulting in $138 billion in relief. An estimate by higher education expert Mark Kantrowitz suggests that 300,000 people might also be eligible for refunds.
The following information will help you.
What is the reason for refunds to borrowers?
According to the Department of Education’s income-driven repayment plans, student loan borrowers are eligible to have any remaining debt forgiven after 20 or 25 years. Despite that, many are still making payments long after that time period has passed.
“This is due in part to strong financial disincentives for student loan servicers to inform consumers about the program,” said Nadine Chabrier of the Center for Responsible Lending.
More than $1 billion a year is paid to Mohela, Nelnet, and Edfinancial to service federal student loans. Advocates say the fees earned by the companies discourage transparency around loan forgiveness.
An inquiry to the service providers went unanswered.
Here are more personal finance articles:
Student loan repayment plan may help borrowers become homeowners
In these two states, renters are most exposed to climate hazards
Expert: IRS silent partner if you win Super Bowl bet
Some servicers fail to record qualifying payments even when borrowers are enrolled in these plans, experts say.
Neither the loan servicers nor the automatic forgiveness was tracking qualified payments, Kantrowitz said. Due to this, some borrowers have continued making payments for decades after they should have been forgiven.
It took Fox 35 years to repay his debt when it was canceled.
As the executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, Buchanan denied that they benefited from defying government orders.
Buchanan said, “We are incentivized to meet the government’s requirements, including giving borrowers the benefits the law provides.” Our business is based in part on meeting those standards.
Persis Yu, deputy executive director at the Student Borrower Protection Center, said that the Biden administration is canceling the debt of those who have been in repayment for 20 or 25 years. (Forgiveness timelines vary by plan.)
Borrowers are also being refunded for payments they made beyond their cancellation window.
SEE ALSO:
