Over 76,000 student-loan borrowers may be defrauding the system, according to a government watchdog. Secretary of Education Betsy DeVos calls them 'dishonest people.' Experts say the situation is more complicated...
Over the past several years, government watchdogs have raised alarm that federal student-loan borrowers are struggling to access programs they’re entitled to under the law to make their student-loan payments more manageable.
Borrowers with a low enough income can make payments of zero dollars a month through these plans and still stay current on their loans. These payments also count towards forgiveness, which happens after 20 or 25 years through IDR repayment programs, depending on the plan. When borrowers enroll in these plans, the government asks those who aren’t earning income to self-certify that’s the case, but doesn’t require them to send in documentation.
So-called student-debt relief companies are likely filing applications with wrong information on behalf of borrowers. Borrower advocates and government agencies have been concerned for years about these companies, which use aggressive marketing techniques — including, mail with government-looking seals, robocalls and internet ads — touting to borrowers that they can lower their student-loan payments for a fee.
Some borrowers may have started earning money after they applied for IDR In addition, it’s possible the GAO identified some borrowers who appeared to have an income qualifying them to make payments, but actually had no income at the time they filled out their IDR application, said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
Experts say watchdog is looking at the IDR program the wrong way More broadly, Yu said the report is looking at the income-driven repayment program the wrong way. “It’s under-utilized,” she said.
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