Companies working for the Department of Education over the past year have allowed hundreds of thousands of borrowers to default on their federal student loans rather than enrolling them in the Obama administration’s debt-relief programs, new data reveal.
In results that have invited comparisons to the Treasury Department’s lackluster distressed homeowner initiative known as HAMP, about as many student loan borrowers defaulted on their federal debts as were aided by the administration’s three main initiatives meant to avert defaults, according to the Education Department figures.
President Barack Obama has made two of those programs — Income-Based Repayment and a similar initiative known as Pay As You Earn — central to what he described in August as his “personal mission” to make a college education more affordable for middle-class families. The two initiatives are more generous to borrowers than the third and similar program known as Income-Contingent Repayment.
All three programs cap monthly payments relative to borrowers’ incomes. Borrowers with high debt loads or low wages generally would benefit most from the initiatives, though only recent borrowers are eligible for Pay As You Earn.
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