Student Loan Borrowers Forced To Reapply For Repayment Plans After Calculation Errors

Student Loan Borrowers Told They Must Reapply For Income-Driven Repayment Plans Due To Calculation Issue

The latest processing problems center on income-driven repayment plans, which offer borrowers affordable payments on their federal student loans based on their income. Payments under IDR plans typically must be recalculated every 12 months, and any remaining balance can then become eligible for student loan forgiveness after anywhere from 20 to 30 years in repayment, depending on the specific IDR plan.

Thousands of borrowers have been applying for IDR plans during the last several weeks as the Education Department began forcing borrowers off the SAVE plan, launched the new Repayment Assistance Plan (or RAP), and opened up the Income-Based Repayment (IBR) plan to Parent PLUS borrowers who had consolidated their student loans prior to July 1 and had enrolled in the ICR plan. The department indicated earlier this month that more than 40,000 borrowers applied to enroll in the new RAP program just in the first 24 hours of the plan’s debut.

Last week, however, borrowers began reporting that after they had applied for an IDR plan and had been accepted at a specific monthly payment amount, they received a subsequent notice from the Education Department telling them that their IDR payment for their federal student loans had been miscalculated. As a result, they would have reapply for their IDR plan again.

“You recently applied for an income-driven repayment (IDR) plan to repay your federal student loans,” reads the notice. “Due to an error, you received an incorrect monthly payment amount. You must submit a new IDR application to enroll in the plan of your choosing and receive the correct monthly payment amount under that plan.”

Scope Of Student Loan Payment Calculation Errors Is Unclear

It us unknown how many student loan borrowers have been impacted by the IDR payment calculation error or have received the notice from the Education Department telling them to reapply. The department has released no public comment, and has not updated its main webpage for the statutory and regulatory changes to federal student loans since July 6.

However, many borrowers have taken to public forums to express their frustration. And it seems that at least in some cases, the department is issuing the letter after borrowers have already started making monthly payments on their student loans under their approved IDR plan.

“WTF? This is such a mess,” said one Reddit user on Saturday. “I already had my first payment today through Nelnet. I’m afraid if I resubmit I’ll have to pay higher and I can’t do that. I already talked with Nelnet and they approved my current payments a month ago. This whole thing is such a mess.”

Other federal student loan borrowers were reporting similar issues.

“I got the same email as well,” said another user in response. “I moved off SAVE and had the plan approved on June 15th.”

“I also got this email,” said yet another. “Moved to PAYE middle of June and they have already processed my first payment.”

Student Loan Repayment Processing Issues Are Piling Up

The notices being issued to student loan borrowers telling them that they need to reapply for their IDR plan do not provide any explanation for the calculation error, and give borrowers little guidance on what to do other than reapply. The letters do suggest that some borrowers with pending IDR applications should check their account activity in their StudentAid.gov accounts before taking action.

“You may have received a notification from your loan servicer indicating your application was processed,” reads the notice. “If you have not received this notification, your application was not processed and has been canceled. You can confirm the status of your application by logging in to StudentAid.gov and navigating to ‘My Activity.’ We apologize for any inconvenience.”

The IDR payment calculation errors are just the latest problems plaguing the federal student loan repayment plan system. Borrowers have been reporting a host of irregularities in recent weeks including:

• The online IDR application displaying incorrect monthly payment estimates for one or more income-driven repayment plans.
• The online IDR application failing to display repayment plan options that a borrower is eligible for, such as the Pay As You Earn (or PAYE) plan.
• The IDR application system failing to factor in a spouse’s federal student loans when calculating income-driven repayment plan payment amounts for borrowers who filed their taxes as married-filing-jointly.
• Instructing borrowers to consolidate their student loans when they not only don’t need to do so, but when consolidation could have severe repercussions including a loss of student loan forgiveness credit.

Other borrowers have been reporting no problems with the online IDR application, but then have subsequently received a confusing series of letters from their student loan servicer suggesting that their monthly payments will be set at a Standard plan amount (which may be unaffordable) and not at the amount suggested in the IDR application.

Ultimately, borrowers who are trying to enroll their student loans in an income-driven repayment plan should be prepared for a wide variety of potential problems. Advocates recommend keeping good records, documenting each step of the process, and disputing any problems directly with your student loan servicer. Borrowers should be prepared to escalate if necessary, such as by filing a request for assistance with your federal elected officials, or bringing the issue to your state attorney general’s office or state student loan ombudsman, if one is available in your state.