After 35 years, he got $119,500 in student debt forgiven. Then the government refunded him $56,801

Since 1988, Marlon Fox has been paying down his federal student debt.

He didn’t see an end in sight. Then, on Aug. 25, 2023, an email popped up in his inbox with the subject line: “Your student loans have been forgiven!”

His $119,500 balance was reset to zero.

“I couldn’t believe it,” said Fox, 65, a chiropractor in North Charleston, South Carolina. “I’d been battling this for so long. I’ve been on cloud nine ever since.”

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After the Supreme Court blocked the Biden administration’s sweeping student loan forgiveness plan last June, it has explored all of its existing authority to leave people with less education debt. One of those strategies has been to take another look at the accounts of borrowers who have been in repayment for decades. Such stories are not uncommon.

Under the U.S. Department of Education’s income-driven repayment plans, student loan borrowers are entitled to get any of their remaining debt forgiven after 20 years or 25 years.

Yet many have not seen that promised relief.

“This is due, in part, to strong financial disincentives for student loan servicers to inform consumers about the program and their ability to qualify for it,” said Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending.

The Education Department contracts with different companies to service its federal student loans, including Mohela, Nelnet and EdFinancial, and pays them more than $1 billion a year to do so. The companies earn a fee per borrower per month, which advocates say discourages transparency around loan forgiveness opportunities.

Even when borrowers are enrolled in these plans, servicers don’t always keep track of their payments, experts say. Records can also get lost when borrowers’ loans are transferred to a different company — a common occurrence.

By the time Fox’s debt was forgiven, he’d been in repayment for 35 years and his account had been managed by at least three different servicers during that time.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, denied that the companies benefit by veering from the government’s orders.

“We are incentivized to meet the requirements that the government sets, which includes giving borrowers the benefits that the law provides,” Buchanan said. “We are audited, and get business or lose it based on meeting those standards.”

So far, the Education Department’s review of borrowers in income-driven repayment plans has erased the debts of about 930,000 people, for more than $45 billion in aid.

Some have even been refunded for their months or years of overpayments.

Shortly after Fox heard that his student loans were forgiven, he received a payment from the government for $56,801.

In the 1980s, Fox borrowed roughly $60,000 to attend the Palmer College of Chiropractic. Shortly after he graduated, his monthly student loan bill was around $1,000. Early in his career and just starting a family, he struggled to come up with that sum.

After his father had a stroke, Fox became his main caregiver and was forced to pick up his expenses and debts. Things got even harder.

At times, Fox enrolled in forbearances, which caused his balance to mushroom. This option for struggling borrowers can keep loans on hold for up to three years, but interest continues accruing. The interest rate on his federal student loans was over 8%.

Fox lived frugally and made payments on his student debt whenever he could. He enrolled in an income-driven repayment plan in the mid-1990s, after Congress established the first one. The plan left him with a more manageable monthly bill, but he barely saw a dent in his balance.

“It still drops so amazingly slowly,” he said.

Time passed. Fox’s hair grayed, and he sent his own children off to college. When he told people he was still paying off his student debt, they scratched their heads.

“Every time I tried to explain this to someone, they’d say, ‘How could that be?'” Fox said.

He wrote to his House representatives and senators, asking them for help. He believed he should have gotten his debt forgiven after a certain point. He got nowhere.

The lawmakers, when they did get back to him, said he should reach out to his servicer. The companies, meanwhile, didn’t have a full record of his payments.

Fox, who considers himself a conservative-leaning independent, said he can’t help but be impressed with the Biden administration’s work.

“No other administration would look into this, and correct the wrongs,” he said.

Fox doesn’t tell many people his story. He lives in a mostly Republican area, where there is a deep skepticism toward forgiving the debt of those who’ve benefited from a higher education.

“They say, ‘Hey, you got your school loans paid off? That’s unfair,'” Fox said. “But if they let me tell my full story, then they understand.”

Over the decades, based on Fox’s records, which CNBC reviewed, he paid around $200,000 on his federal student loans.

That debt still casts a shadow over his life.

Those large bills left Fox with little money to save toward retirement.

“I’ll probably always work,” he said.

He can’t remember the last time he took a full week off from work.

“That’s a whole week without pay, and that would make it difficult to meet these huge payments,” he said. “My wife was really upset I wouldn’t take off.”

For the first time in years, though, he and his wife, Debbie, booked a vacation: a week in Maui. He’s excited to spend time on the beach, and to see the turtles and whales, and to eat red snapper.

As for his refund? It’s gone. He used the cash to pay off his children’s student loans.