32 people qualified for full student loan forgiveness under government repayment plan
- Federal income-based repayment plans, created in 1995, have enrolled millions of student loan borrowers.
- But only 32 people have already benefited from debt cancellation thanks to these plans, according to a new report.
- House Democrats recently passed a provision not to impose student debt forgiveness until 2025.
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Only 32 student loan borrowers have ever been canceled under federal income-based repayment programs, the National Consumer Law Center said in a report on Monday.
The first income-based repayment plan, then known as income-based repayment, was introduced in 1995, offering borrowers the option of setting their monthly payments based on their income.
Over the years, other IDR plans have sprung up, all of which have a similar goal, to “fix the borrower’s monthly payment based on a portion of the borrower’s income and write off any remaining loan balances. loan after 20 to 25 years of payments, ”according to the NCLC report. .
More than 8 million borrowers are enrolled in repayment programs, and 2 million people have been in repayment for more than 20 years, according to the report. But in the 25 years of the program’s existence, only 32 people have ever had their student debt canceled, the NCLC said.
The cancellation was designed to ensure that low-income borrowers can eventually lift themselves from the burden of unaffordable debt and protect them from the damaging financial effects of this ‘negative amortization’ – ensuring that federal student loans do not not become the type of debt trap commonly associated with predatory payday loans and subprime mortgages, ”the report said.
He added that “if this structure worked as intended when it was first authorized over two decades ago, low-income borrowers would routinely have their debts canceled under the IDR today.”
Democrats included a provision in the $ 1.9 trillion stimulus bill the House passed on Wednesday, exempting student loan forgiveness from tax until the end of 2025.
President Joe Biden extended student loan forbearance until September and expressed support for the cancellation of $ 10,000 in student loan debt for borrowers, although Democrats urged him to write off 50,000 $ debt per borrower.
The stimulus provision was included by the senses. Bob Menendez of New Jersey and Elizabeth Warren of Massachusetts, who ran as the 2020 Democratic presidential candidate on a student debt relief platform.
Warren shared an Inside Higher Ed article on the NCLC report on Twitter Wednesday. “Our student loan system is broken,” Warren wrote. “The income-based repayment is supposed to provide relief – but only 32 people’s loans were canceled by the program. Not 32,000. Only 32.
“We need to stop blaming student borrowers for this mess and #CancelStudentDebt now,” she added.