7,700 student-loan borrowers could be 'potentially eligible' for debt forgiveness — but they're still making payments, government watchdog finds

• The GAO found 7,700 borrowers on IDR plans are "potentially eligible" for forgiveness but are still paying.
• The Education Department just announced steps to fix IDR plans, including correct payment tracking errors.

The Education Department just announced plans to reform a student-loan repayment program, and a new report from a government watchdog revealed just how necessary those fixes are.

On Wednesday, the Government Accountability Office released a report analyzing loan forgiveness that borrowers enrolled in income-driven repayment plans receive. IDR plans create a monthly payment plan based on a borrower's income and family size, and it promises loan forgiveness after 20-25 years on the plan, but prior data found only 32 borrowers — ever — have received full forgiveness under the plan, despite 4.4 million having been in repayment for 20 years or longer.

GAO's report found that as of June 1, 2021, the Education Department had approved 157 more borrowers, but 7,700 additional loans are "potentially eligible" for forgiveness but the borrowers are continue to make payments.

"Education's repayment data do not provide enough information to definitively determine why these loans—totaling about $49 million in outstanding debt—had not been forgiven as of September 1, 2020," the report said. "Education officials said data limitations make it difficult to track some qualifying payments and older loans are at higher risk for payment tracking errors. Until Education takes steps to address such errors, some borrowers may not receive the IDR forgiveness they are entitled."

The report noted that IDR loans potentially eligible for forgiveness will reach 1.5 million by 2030, emphasizing the need to correct past errors with payment tracking.

In February, the GAO reached out to Federal Student Aid director Richard Cordray outlining recommendations the agency should take to reform IDR, and on Tuesday, it appeared the department took into account GAO's concerns. The department said 3.6 million borrowers will be brought closer to relief through IDR by conducting a one-time adjustment of accounts to count past payments toward loan forgiveness progress and modernizing the payment tracking process.

Specifically, prior to the department's announcement, the GAO found gaps in communication outreach to IDR borrowers in that oftentimes, loan companies would not notify borrowers of their progress toward forgiveness unless the borrower specifically requested that information. GAO recommended that the department improve outreach surrounding IDR, ensure regular updates on progress toward forgiveness, and develop procedures to correct errors, and Cordray told the watchdog he agreed with all of the suggestions.

"We're glad that the Department agreed with the findings and recommendations from our report and is taking steps to implement our recommendations," Melissa Emrey-Arras, author of the GAO report, told Insider. "Going forward, we will be monitoring Education's actions and progress towards closing our recommendations."