There’s something slightly annoying about going to your student loan account and seeing a balance that, according to the rules, shouldn’t be there. Like a lot of people across the country, these people got official letters from the U.S. Department of Education saying their loans were approved for automatic discharge, but when they checked their accounts, the numbers hadn’t changed.
The Department of Education has been asked to give answers but has been unwilling to do so because of a lawsuit filed by the Project on Predatory Student Lending. It’s not new forgiveness that’s being asked for. It’s records. The group, which helps people who are taking out student loans, says it made many Freedom of Information Act requests over a number of years and didn’t get much back. This led to the case going to court. “The Department made public promises to more than 1.5 million borrowers,” said Eileen Connor, president and executive director of the group. “It shouldn’t take a lawsuit to learn whether those promises have been fulfilled.”
The amounts at stake are real and big. The Education Department said that more than $23 billion in federal student loans would be forgiven for people who went to schools that were found to have used dishonest or predatory practices. These promises weren’t just words. Borrowers were told that discharges would happen automatically, without them having to fill out an application or go through any other steps. Just relief that was put on their accounts. A lot of people feel like they can only find relief on paper.
A teacher of financial literacy at the University of Tennessee at Martin named Alex Beene put it simply: if data can’t clearly show whether relief was actually delivered, borrowers end up paying on debts the government said it would cancel. It’s not a matter of detail. For someone whose budget is based on expecting a zero balance, it’s a real problem with their money.
It’s important to note that this lawsuit comes at a tough time for federal student loan policy in general. The SAVE repayment plan from the Biden administration has been taken apart by the current administration. Income-based repayment plans are changing all the time. It has taken years for the Public Service Loan Forgiveness program to finish all of its work. It seems like the student loan system, under different administrations, has made it a habit to promise help that it doesn’t always deliver on time or at all.
This was one of the better ways that Kevin Thompson, CEO of 9i Capital Group, explained how things got to this point. A judge told the Education Department it had to handle borrower defense claims by a certain date, but it didn’t. At that point, any claims that hadn’t been settled should have been released right away. The courts pretty much lost patience. Notices of discharge began to be sent out. Still, some borrowers are seeing balances on loans they were told were forgiven but still have to pay.
Part of the problem that the lawsuit is trying to fix is that it’s still not clear how many borrowers are stuck in this gap. The advocacy group wants records that show how many discharges have been completed and how many people are still in what you could call “administrative limbo”—technically forgiven but still owed money.
The lawsuit shows that there is a problem with how the federal government talks to borrowers, regardless of the outcome of the case. If you want to forgive a loan, you need to send someone a formal notice. It sets real goals and affects real financial choices. Notices that don’t match up with what’s really going on with an account do more than just cost money; they also hurt trust, which is hard to get back. As I watch this happen, I can’t help but wonder how a department that is in charge of hundreds of billions of dollars in debt doesn’t have better answers to the question of whether it did what it said it would do.
As of this writing, the Education Department hadn’t replied to questions from the press. Borrowers finally have someone asking the right questions loud enough that they can’t stay quiet. This is true whether the lawsuit produces records, speeds up processing, or just makes promises that were made and not kept public.
