Student Borrowers May Still Owe Thousands in Unexpected Bills Despite Forgiveness

Sep 2, 2025 - 14:00
 0  0
Student Borrowers May Still Owe Thousands in Unexpected Bills Despite Forgiveness

Even after years of repayment, many student borrowers still face lingering debt, tax consequences, and financial hardship—thanks in large part to administrative glitches, servicer mishaps, and growing backlogs in forgiveness and repayment processing.

What We Know:

  • Forgiveness Delays Amid Legal and Systemic Disruption
    The Department of Education has paused processing forgiveness under major income-driven repayment plans—such as SAVE, PAYE, and ICR—following legal challenges. Although IBR forgiveness remains legally permissible, the department halted it too while updating its systems, leaving thousands of borrowers in limbo as they continue to accrue interest and risk losing the current tax-free treatment of forgiven debt.
  • A Growing Backlog of Pending Forgiveness Applications
    The PSLF Buyback program, designed to help public service workers apply previously excluded periods of deferment or forbearance toward forgiveness, is suffering severe delays. Tens of thousands of borrowers await decisions, further exacerbating uncertainty and undermining trust in the system.
  • Horrific Servicing Errors by MOHELA and Others
    A report from the CFPB reveals widespread errors by loan servicers—ranging from billing mistakes and misprocessing of payments to delays in handling income-driven repayment applications—creating financial pain for borrowers. MOHELA, in particular, stands out: a Senate investigation found nearly 2 million duplication errors on credit reports due to account transfers, leading to damaged credit scores and financial harm. Additionally, MOHELA failed to send billing statements on time—prompting a $7.2 million fine from the DOE—and was accused in lawsuits of mismanaging PSLF applications and blocking legitimate pathways to debt relief.
  • Personal Stories Shine a Light on Systemic Breakdown
    MaNesha Stiff, a 44-year-old nonprofit professional with nearly $200,000 in loans, qualified for PSLF after nearly two decades of public service. But due to a servicer error by MOHELA, her cancellation notice was rescinded—leaving her emotionally distraught and financially unstable. Around 500 others reportedly suffered similar errors.
  • Resumption of Collections Sparks Fresh Hardship
    As of May 2025, the government has restarted student loan collections—threatening wage garnishment and Social Security offsets for millions. Many borrowers feel blindsided and unprepared after the long pause, with nearly 10 million projected to default in the coming months.
  • Long-standing Tracking Failures Still Persist
    A 2022 Government Accountability Office report found thousands of borrowers on income-driven plans were still making payments despite being eligible for forgiveness—undermined by tracking inadequacies and systemic neglect by the Department of Education.

With servicer mismanagement, legal freezes, and bureaucratic backlogs delaying forgiveness—while collections and tax liability loom—borrowers are left bearing the consequences of a system in disarray; transparency, accountability, and reform are urgently needed to right this wrong.

If you are a student borrower expecting to be free and clear of payments after forgiveness, it may be time to take a forensic look at your records.

What's Your Reaction?

Like Like 0
Dislike Dislike 0
Love Love 0
Funny Funny 0
Angry Angry 0
Sad Sad 0
Wow Wow 0
UnmutedNewswire The Unmuted Newswire Service Provides Aggregated Stories and Content.