Dive Brief: 

• The U.S. Department of Education’s Federal Student Aid office received around 101,500 cases in fiscal 2022 — the majority of which were complaints — more than doubling the number of cases received the year before. 
• That’s according to a new Federal Student Aid report, which attributes the rise in cases to efforts to make it easier for students and borrowers to report issues, as well as several high-profile policy changes and events affecting student loans.  
• Those include the Biden administration’s proposal to forgive large amounts of student debt and the Education Department’s recent $6 billion settlement agreement to wipe away loans for hundreds of thousands of students who say they were defrauded by their colleges. Both of those efforts have been challenged in court.

Dive Insight: 

The report reveals which groups of borrowers are most struggling to navigate the federal student loan system and where they are hitting snags. 

Of the nearly 90,000 complaints borrowers lodged about federal student aid, 57% centered on issues with loans. Among those, many related to income-driven repayment plans, which allow borrowers to have their loans forgiven after they make a certain number of payments based on their income. 

The problems plaguing income-driven repayment plans have been well-documented. Few borrowers opt for these plans even if they qualify for them, and those that do often fail to stay enrolled as they face bureaucratic and technical hurdles. 

As of August 2022, the Federal Student Aid received more than 20,200 complaints from borrowers in income-driven repayment plans — more than any other type of loan plan. 

The Biden administration recently proposed changes to income-driven repayment plans that would slash payments in half for undergraduate borrowers and allow more people to qualify. 

However, a recent report from the Urban Institute, a left-leaning think tank, questioned whether the Education Department would be able to roll out these changes given the problems that have dogged the program. 

The Public Service Loan Forgiveness program, or PSLF, has also been a pain point for borrowers, according to the Federal Student Aid report. The program is meant to forgive federal student loans for borrowers who have government jobs or work in the nonprofit sector and make a decade of qualifying payments. 

However, administrative issues have been rampant within the program, and few borrowers have received loan forgiveness through this route. 

Of the roughly 51,300 complaints about loan repayment, 21% regarded the program’s monthly payments and another 9% were about applications for PSLF. 

The report notes some of these issues have arisen at the same time that the Education Department rolled out a temporary policy allowing borrowers to count certain payments they’ve made toward forgiveness under PSLF, including those that wouldn’t have previously qualified. The administration is also making permanent changes meant to smooth out wrinkles in the program. 

Federal Student Aid also received more than 6,300 student complaints related to their colleges, such as having problems with their aid disbursements. Students attending for-profit colleges tended to complain about their institutions charging them unforeseen balances that their aid didn’t cover, forcing them to cover the costs out of pocket, according to the report. 

Nearly 1,700 complaints regarded borrower defense to repayment applications, which allow borrowers to have their loans forgiven if their institutions misled them. 

In June, the Education Department announced a $6 billion settlement with students who alleged the agency had mishandled and delayed decisions on their borrower defense applications. 

Under the settlement, which would end the Sweet v. Cardona lawsuit, hundreds of thousands of borrowers would receive automatic relief if they attended one of the schools on a list of 150-plus institutions that the Education Department compiled. 

“Since the announcement, FSA continues to receive complaints from borrowers who attended a school in the Sweet group but who had never submitted a Borrower Defense application and, are therefore not covered by the settlement,” the report states. 

However, the final settlement agreement would require the Education Department to streamline the borrower defense application process for those who file claims after the deal was reached, affecting some 179,000 borrowers. 

Three of the colleges whose students are covered by the settlement list have appealed the deal, potentially tying it up.