Education has taken steps intended to increase borrower awareness of
income-driven repayment plans, including IBR and PAYE, but has not
consistently provided information about these plans to borrowers who
have entered repayment.
Page 22 GAO-15-663 Federal Student Loans
30 According to Education’s Fiscal Year 2012-
2016 Strategic Plan for federal student aid, in support of its goal to
provide superior information and service to borrowers, Education aims to
compile and distribute information on the costs and benefits of higher
education programs to improve financial literacy and support borrowers’
decision-making.31 Education reported in its fiscal year 2015 budget
proposal that many borrowers seemed unaware of income-based or other
repayment options.32 Further, in February 2015, Education officials
highlighted ongoing concerns about awareness, noting that feedback they
have obtained from borrowers suggests borrowers are less aware of
income-driven repayment plans and many borrowers have not considered
these plans because they did not have enough information about them. In
addition, although 12 of the 14 borrowers we interviewed were aware of
income-driven repayment plans, 9 said they had to do their own research
to find information about them or did not have a good understanding of
the plans.33
Education provides detailed information about income-driven repayment
on its website, including repayment terms; eligibility requirements; a
calculator that allows borrowers to estimate monthly loan payments and
total loan costs under different repayment plans; and an online counseling
tool that includes repayment options. Education also has begun
publicizing IBR and PAYE through social media. However, borrowers
must actively seek information through these sources. Education also
provides information about repayment plans—including IBR and PAYE
terms, benefits, and eligibility requirements—in the borrower rights and responsibilities statement that is provided when borrowers receive their
loans and through required entrance and exit counseling completed by
borrowers when they begin and end school. However, Education does not
directly provide this information to borrowers once they have entered
repayment, when they may have a better sense of whether they can
afford their monthly payments.
In an effort to increase awareness of IBR and PAYE, Education
conducted outreach campaigns from fall 2013 through May 2015, in
which it sent emails to almost 5 million borrowers in targeted groups, such
as delinquent borrowers and borrowers in their grace period who had
more than $25,000 in debt.
Page 23 GAO-15-663 Federal Student Loans
34 The emails provided general information
about income-driven repayment terms and benefits and directed
borrowers to Education’s website for more information. Education officials
said the department emailed these borrowers directly instead of having
loan servicers do so because customer feedback has shown borrowers
are not always familiar with their servicer.35 Education officials told us in
June 2015 that they plan to email in-grace borrowers with over $25,000 in
loan debt twice per year. In addition, Education has partnered with
Treasury since 2014 to include a message about income-driven
repayment options on the back of tax refund envelopes, and with Intuit
Inc. to include information about these options for borrowers who used
TurboTax to file their taxes. Education officials told us that, based on the
success of these efforts, they are continuing their partnership with Intuit
Inc. and that they formed a new partnership with H&R Block and Treasury
to publicize income-driven repayment options.
Once borrowers enter repayment, Education primarily relies on its loan
servicers to communicate directly with them about repayment options.
Although Education requires loan servicers to send certain
communications to borrowers who already participate in income-driven repayment plans,
Page 24 GAO-15-663 Federal Student Loans
36 it has not established specific requirements for how
servicers communicate with other borrowers about the plans. Instead,
Education officials said the department provides financial incentives to
servicers to help keep borrowers current in repayment (e.g. not in
delinquency, default, or forbearance).37 Representatives from the three
selected loan servicers we interviewed, which collectively serve about half
of borrowers with loans owned by Education, said they generally make
information about income-driven repayment available through customer
service representatives and websites. However, borrowers must actively
seek information through these sources. Documentation from these three
servicers also showed that they contacted some borrowers with
information about repayment options, including IBR and PAYE, when
borrowers missed monthly payments or their deferment or forbearance
periods were ending. However, when we reviewed sample written
communications the three loan servicers sent to all borrowers in
repayment in 2014, we found inconsistency in the information they
provided about income-driven repayment plans. In addition, these
communications did not include information about how the plans work or
their eligibility requirements. For example:
· Two servicers included a list of repayment plans, including IBR and
PAYE, on the back of monthly billing statements sent to borrowers but
did not describe the plans or their benefits.
· Another servicer, which serves more than 5 million borrowers, sent
billing statements mentioning the availability of repayment plans that
may help borrowers who are having difficulty making payments. The
statements indicated these plans could reduce monthly payments and
are based on income, but did not identify specific repayment plans.
The inconsistency and gaps we identified in how Education and its loan
servicers communicate with borrowers about income-driven repayment
raise questions about the sufficiency of this information. Without such
information, borrowers who are unaware of these plans may miss the
opportunity to reduce their risk of delinquency or default.
While information on PSLF participation will not be available until
borrowers can begin applying for loan forgiveness in October 2017, about
147,000 borrowers have had their employment and loans certified for
PSLF as of September 2014, according to data from Education’s loan
servicer for the program. Although borrowers may wait until 2017 before
requesting certification, those who participate in the voluntary process in
advance learn whether they currently meet the basic eligibility
requirements and the number of qualifying loan payments they have The exact number of borrowers eligible for and planning to apply for
PSLF forgiveness when it becomes available beginning in 2017 is not
known.
Page 27 GAO-15-663 Federal Student Loans
39 Only borrowers who complete Education’s voluntary process
provide their employment information to Education, and we identified no
additional data source on both federal student loans and public service
employment that would allow us to identify borrowers who may be eligible
for PSLF. However, according to 2012 annual employment data from the
Bureau of Labor Statistics, an estimated 24.7 percent of U.S. workers
nationwide (32.5 million of 131.7 million) were employed in public service,
considering federal, state, and local government agencies and 501(c)(3)
nonprofit organizations.40 If rates of public service employment are
comparable among Direct Loan borrowers, about 4 million current Direct
Loan borrowers may be employed in public service.41 Furthermore, if
rates of public service employment are comparable among Direct Loan
borrowers across repayment plans, about 643,000 Direct Loan borrowers
repaying their loans through IBR, PAYE, and ICR as of September 2014
may be employed in public service. As previously discussed, these
repayment plans are more likely to leave borrowers with an outstanding balance after 120 payments and enable them to benefit from PSLF after it
becomes available in 2017.
Most of the borrowers who had their employment and loans certified for
PSLF were enrolled in an income-driven repayment plan, had annual
adjusted gross incomes exceeding $20,000, and had borrowed more than
$30,000.
Page 28 GAO-15-663 Federal Student Loans
42 As of September 2014, 71 percent (104,422 of 146,866) of
borrowers who had their employment and loans certified for PSLF were
enrolled in IBR, PAYE, or ICR (see fig. 8).43 Borrowers on these incomedriven
plans for longer periods of time are more likely to have remaining
loan balances to be forgiven after making the required 120 payments, in
contrast to those on other qualifying plans, such as 10-year Standard
repayment, who would be set to fully repay their loans in 10 years or
less.44 Officials from Education’s loan servicer for PSLF told us they
encourage borrowers who had employment and loans certified for PSLF
to enroll in repayment plans that are more likely to enable them to benefit
from forgiveness.