A new federal approach – using a sort of ‘red tape’ language to talk about advancing the rights of student loan borrowers – could pay off for borrowers all over the country.
Actually, it’s guaranteed to help them save quite a bit of money.
Recent reports show that the Biden administration is pursuing what it calls an “IDR account adjustment” program.
Calling the process an ‘adjustment’ rather than loan forgiveness is both practical and accurate.
Part of what planners say is that this is intended to address the missteps of student lenders in miscounting payments!
We’ll get to that later…
The Benefit to Borrowers
Onlookers estimate that the IDR account adjustment program will ultimately save 855,000 borrowers the immense amount of $42 billion.
For those playing along at home, that’s a whole $49,000 per person!
Some of what the IDR account adjustment does includes:
- Tying past loan payments to income-driven repayment plans
- Making those who have been paying into student loan debt for 20 to 25 years eligible for loan counseling
- Making student loan payments non-taxable to the federal government – (borrowers still have to look at state and local rules)
Where Did It Come From?
Although some of these processes developed in the 1990s, experts can point to this past spring, when the IDR account adjustment program built up steam.
Think about it this way – legislators and others blocked a wider loan forgiveness program that was pretty much a done deal before we got into these shenanigans over the budget and everything else.
The IDR account adjustment does a lot of the same things, but just does them in a different way, a way that uses careful bookkeeping and fairness. It’s really inspiring to those who have to do battle with incompetent, shady or even fraudulent lenders. That’s partly because it delivers real financial results – but it’s also because, at bottom, the effort is meant to be retributive, in a way. It’s because of the fraud, at least partially, that the government is doing this. But it’s also because the government feels people shouldn’t have to pay 25% or 30% or even 50% of their take home pay on student loan debt.
Legal Challenges
So why are some sorts of “think thanks” trying to shut down the IDR account adjustment program?
The New Civil Liberties Alliance and the Mackinac Program for Public Policy have filed appeals with federal courts to try to get them to throw out this common sense change.
“A federal court dismissed the suit, concluding that the Plaintiffs do not have standing,” wrote Adam Minsky at Forbes in August, detailing some of the context around the case. “Standing is the concept that an entity seeking remedies in federal court must demonstrate a concrete injury directly tied to the challenged rule or program. In this case, the groups argued that the IDR Account Adjustment would harm their interests as nonprofit organizations by reducing the effectiveness of the PSLF program as a recruiting and retention tool.”
But before you breathe a sigh of relief – there’s an appeal.
“The interesting thing is that much of the vitriolic student loan forgiveness discourse has been aimed at ‘undeserving and entitled’ twenty somethings that ‘didn’t uphold their side of the bargain.’” writes Chris Williams at Above the Law. “Here we have people who have spent decades paying back their student loans and should qualify for forgiveness, but even that’s not enough — even when they’ve overpaid!”
If you dig a little though the new civil liberties alliance is backed by Charles Coch and the Mackinac Center for Public Policy has these stated aims:
“lower taxes, reduced regulatory authority for state agencies, right-to-work laws, school choice, and enhanced protection of individual property rights…”
Although these are not mutually exclusive, it’s not likely that they really have student loan borrower’s best interests in mind, as Williams and others point out.
Keep Eyes on the Situation
This is the autumn in which student loan repayment programs are ramping back up, after being off-line for about three years because of the pandemic. As Williams notes, it’s “spooky.” It’s also frustrating, to say the least, for borrowers who are dealing with lenders that can’t, or won’t, keep their books straight.
A lot of people have new payment plans to deal with, which wouldn’t be nearly as scary if a lot of these lenders and loan servicers didn’t have histories of playing fast and loose with the truth.
But the IDR account adjustment and the idea of income-driven repayment plans is throwing these borrowers a major lifeline.
If you can only have a smaller portion of your income taken up with student loan debt payments, that’s going to do two things for many borrowers – first, it will reduce the payments, and secondly, it will lead them toward eliminating those funds altogether. So there’s hope at the end of the tunnel. Stay up on all of this at our blog and look for help from the CFPB and other office set up to advocate for you.
