More than 300,000 requests for a student loan new payment plan have been denied by the United States Department of Education.
A court filing on 15 December revealed that in August alone, there were 327,955 borrower requests to be enrolled in an income-driven repayment plan (IDR), which were all denied, leaving borrowers locked into repayment plans with higher monthly instalments or a forbearance that is accruing interest.
IDR plans put a cap on borrowers’ monthly bills, based on a share of their income, and eventually lead to debt cancellation after a period of 20 to 25 years.
The Education Department cited “unforeseen ambiguity” as the reason for the IDR rejections in the filing.
This comes less than a month after confirmation from the Trump administration that wage garnishing on student loans could begin as soon as January.
The current outstanding student loan debt in the States exceeds US$1.6 trillion.
