Richard Blasen, Office of Postsecondary Education, 400 Maryland Ave. SW, Washington, DC 20202. WebLoans are disbursed in three installments each semester for those participating in the William D. Ford Subsidized and Unsubsidized loan program. The Department also recognizes that many borrowers in default may not make voluntary payments but could be subject to forced collections activity. (ii) A borrower who has made 120 or more qualifying repayments under the REPAYE plan on or after July 1, 2023, may not enroll in the IBR plan. Technical Report GAO-17-22. consulted and served as a resource. Due to recent statutory changes regarding disclosure of tax information, when the Department has the borrower's approval, it will rely on tax data to provide a borrower with a monthly payment amount and offer the borrower an opportunity to request a different payment amount if it is not reflective of the borrower's current income or family size.[49]. They asserted that loan forgiveness should not take 20 to 25 years for all borrowers. Webwork with Congress on meaningful and sustainable student loan reforms. The Committee reached consensus on interest capitalization. The overall caps of 20 years (for those with only undergraduate loans) or 25 years (for those with graduate loans) would still apply. However, for Borrower A, this is just $41 less than the $203 they would pay on the 10-year standard plan. We also considered multiple options for how the time to forgiveness should change with the level of additional debt. GAO-15-663. U.S. Government Accountability Office, 2016. The Department has identified a significant need for regulatory action to promote access to more affordable repayment plans for student loan borrowers. For periods of deferment or forbearance for which borrowers do not automatically receive credit, borrowers could make additional payments through a new provision that would allow them to also get credit for those months. Pursuant to 685.221(b)(1), the borrower's aggregate monthly loan payments are limited to no more than 15 percent or, for a new borrower as of 2014, 10 percent, of the amount by which the borrower's AGI exceeds 150 percent of the poverty guideline applicable to the borrower's family size, divided by 12. Value Factors for Official Yield Curve (Budget 2023) so that the resulting amounts are all provided in present discounted terms. This would include periods of mandatory administrative forbearance when a servicer, not at the request of the borrower and for administrative reasons, pauses a borrower's payments while the servicer reviews other information about the borrower's loans. Having the time to forgiveness increase by 1 year for each $1,000 borrowed would keep the income at which a borrower would benefit from this provision roughly constant, such that a borrower would not be able to benefit from forgiveness at years 11 through 19 at an income level far different from what a borrower could earn and still receive forgiveness at year 10. Optimal student loans and graduate tax under moral hazard and adverse selection. https://bfi.uchicago.edu/working-paper/2020-169/. Start Printed Page 1901 [74], Table 10Small Institutions Under Enrollment-Based Definition. College affordability and student loan debt are significant challenges for many Americans. This may include situations where a borrower would have had a $0 payment on an IDR plan but was placed in a forbearance instead. 1845-0065 OMB Approved Exp. On October 23, 2008, the Department of Education amended the regulations for the Federal Perkins Loan (Perkins Loan) Program; the Federal Family Education Loan (FFEL) Program; and the William D. Ford Federal Direct Loan (Direct Loan) Program, including the Public Service Loan Forgiveness (PSLF) Program offered within the Direct By contrast, just 1 percent of borrowers who are in default had loans only for graduate studies. Section 455(e)(4) of the HEA authorizes the Secretary to establish income-contingent repayment plan procedures and repayment schedules through regulations. In the former category, the Department heard repeatedly about concerns that the current amount of income required to be devoted to payments is too high and that it is a particular challenge for borrowers who are located in areas with higher costs of living, because current IDR formulas do not consider expenses. The Department also decided against proposing to start the shorter forgiveness period at original principal balances of $10,000 because the incomes where a borrower would stop benefiting from this option are too far below the national median income for households with at least some college. Interest. Not all of the interest that would no longer be charged under this proposal is a true new cost to the government. means, (i) For the purpose of the PAYE plan, an individual who, (A) Has no outstanding balance on a Direct Loan Program loan or a FFEL Program loan as of October 1, 2007, or who has no outstanding balance on such a loan on the date the borrower receives a new loan after October 1, 2007; and. proposed 685.209(f)(1), (h)(i), and (k)(i)-(ix), the Department proposes to modify the REPAYE plan to increase the amount of discretionary income exempted from the calculation of payments to 225 percent of the applicable poverty guideline, reduce monthly payment amounts as a percentage of discretionary income from 10 percent to 5 percent for the share of a borrower's total original loan principal volume attributable to outstanding loans received by the borrower to pay for an undergraduate program, not charge any remaining accrued interest after applying a borrower's monthly payment, and reduce the time to forgiveness under the plan for borrowers to as short as the equivalent of 10 years of qualifying payments for those with original loan balances of $12,000 or less. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/dec7am.pdf, U.S. Government Accountability Office, 2016. for better understanding how a document is structured but Income. Learning more about and applying for these programs is a great way to not only lessen your monthly payments but also improve your credit. For more on the SIPP, please see: Executive Order 13132 requires us to ensure meaningful and timely input by State and local elected officials in the development of regulatory policies that have federalism implications. The Department believes the approach to lower payments for undergraduate loans is preferable to setting an even higher income exemption than the 225 percent of the Federal poverty guideline proposed in this regulation. For example, the income adjustment factor used in the baseline was .65, so the adjustment factor for the sensitivities are .70 and .55, respectively. WebHow to Apply for a William D. Ford Direct Student Loan. This would occur if the borrower has provided approval for the IRS to share their tax information with the Secretary, and if the Secretary determines that the borrower's payment would be lowered by enrolling in an IDR plan. If you must submit a comment in Adobe Portable Document Format (PDF), the Department strongly encourages you to convert the PDF to print-to-PDF format, or to use some other commonly used searchable text format. Long Beach City College participates in the William D. Ford Federal Direct Loan Program (Direct Loans). Several non-Federal negotiators also raised concerns that many borrowers may have paused their payments through deferments or forbearances because of misinformation or actions by their servicer. Date 8/31/2024. Importantly, the Department proposes to base early forgiveness on what the borrower originally borrowed. The Department agrees that there are benefits to allowing the treatment of spouses' income of married borrowers in all IDR plans to mirror the PAYE and IBR plans, which include only the borrower's income in the calculation of the monthly payment amount in the case of married borrowers who file separate Federal income tax returns. The form update would be completed and made available for comment through a full public clearance package before being made available for use by the effective date of the regulations. https://www.census.gov/content/dam/Census/library/visualizations/2021/demo/p60-273/figure1.pdf. Department analysis of data from the FSA Data Center, available at Consistent with the requirements of the Credit Reform Act of 1990, budget cost estimates for the student loan programs reflect the estimated net present value of all future non-administrative Federal costs associated with a cohort of loans. The current regulations also provide, at 685.209(a)(5)(i)(B), 685,209(b)(3)(i), 685.209(c)(4)(i)(A), and 685.221(e)(1)(ii), that borrowers may submit alternative documentation if the AGI is not available or does not reasonably reflect the borrower's current income. Check out the Department of Educations website for the latest information. The notice set forth a schedule for Committee meetings and requested nominations for individual negotiators to serve on the negotiating committee. The Committee reviewed and discussed the Department's drafts of regulatory language and alternative language and suggestions proposed by negotiators and Subcommittee members. The Department believes that this would increase the likelihood that struggling borrowers will be enrolled in an IDR plan and will be able to avoid late-stage delinquency or default and the associated consequences. This proposed regulation, formally known as Improving Income-Driven Repayment for the William D. Ford Federal Direct Loan Program (RIN 1840-AD81), would turn a safety-net for low-income federal student loan borrowers into an unsustainable transfer of wealth from hardworking These loans are backed by the U.S. government, so if a student defaults, the government guarantees repayment to the lender. The Department would benefit from streamlining administration, and taxpayers would benefit from the lower rates of delinquent/defaulted loans. Borrowers who are making their monthly payments may also see their loan balances balloon over time as interest accrues. notice published annually to account for inflation; or. Department analysis of data from the National Postsecondary Student Aid Study 2015-16 using the PowerStats web tool at The proposed collection associated with this NPRM is 1845-0102. of Defense Student Loan Repayment Program Forbearance Exp. These markup elements allow the user to see how the document follows the Table 1Rates of Material Hardship by Family Income Groups Relative to Poor Individuals. (4) A borrower may repay under the PAYE plan only if the borrower. Increasing the income protection threshold would better achieve the goals of IDR, allow more low-income borrowers to qualify for $0 monthly payments, and allow more borrowers to cover the cost of necessities without becoming delinquent on their student loans. https://www.dol.gov/agencies/whd/mw-consolidated. Student loan debt has risen to $1.6 trillion in aggregate over the past 10 years, and the inability to repay student loan debt has been cited as a major obstacle to middle class milestones such as homeownership. Start Printed Page 1904 Department analysis of data from the Survey of Income and Program Participation, Census Bureau. Would clarify that borrowers in default are eligible to make payments under the IBR plan. IDR plans simultaneously provide protection for the borrower against the consequences of ending up as a low earner and adjust repayments to fit the borrower's changing ability to pay. establishing the XML-based Federal Register as an ACFR-sanctioned Non-Federal negotiators suggested some alternative ideas for addressing concerns around usage of deferments or forbearances, which included counting all periods of forbearance or automatically counting certain periods of forbearance before a certain date. In fact, if both borrowers made $60,000, then Borrower A would pay $42 more per month under IDR than on the 10-year standard plan, while Borrower B would still pay $200 less. 1221e-4, the Secretary particularly requests comments on whether these proposed regulations would require transmission of information that any other agency or authority of the United States gathers or makes available. See, for example, Barr, Andrew, Kelli Bird, and Benjamin L. Castleman, The Effect of Reduced Student Loan Borrowing on Academic Performance and Default: Evidence from a Loan Counseling Experiment, EdWorkingPaper No. For example, if a borrower has made 30 qualifying payments on loans with an original principal balance of $30,000 and consolidates them with a loan that includes another $30,000 of loans that have never had any qualifying payments, then the borrower's consolidation loan would be credited with 15 payments toward forgiveness. The shorter time to forgiveness would provide small-dollar borrowersoften the borrowers who did not complete college and who struggle most to afford their loans and avoid defaultwith a greater incentive to enroll in the IDR plan, increasing the likelihood they avoid delinquency and default. That study also found that those borrowers saw an identical increase in consumer spending that was roughly equal to the decrease in monthly student loan payments. Federal Register However, the existing cohort default rate already was causing very few institutions to lose access to Federal aid. The Secretary certifies, under the Regulatory Flexibility Act (5 U.S.C. 29. The Department also invited nominations for two advisors. It is not possible to fix this problem by equalizing the amount that monthly payments decrease, since the underlying payments on a 10-year standard plan for higher-balance loans will always be larger than those for lower-balance loans. Non-Federal negotiators submitted a variety of proposals relating to the issues under discussion. In other words, if a borrower has a $600 tax refund credited against their loan debt through the Treasury Offset Program and their monthly payment on the 10-year standard plan would have been $50, then they would receive a year's worth of credit toward IBR forgiveness. Monthly payment amounts. Section 685.210 is revised to read as follows: (a) The Department has evaluated the needs of borrowers and determined that the benefits of providing a more generous repayment plan, which will help to encourage borrowers to enroll in a single plan and ultimately contribute to a more streamlined set of repayment options, outweighed the benefits of retaining the current plan. Because the Department is proposing that borrowers with loans attributed to a graduate program must make 300 qualifying payments to receive forgiveness, we are concerned that a borrower might choose to make the lower payments available on REPAYE and then switch to IBR to receive immediate forgiveness. This proposed regulation is intended to address these challenges for borrowers by ensuring access to a more generous, streamlined IDR plan. The Department believes that protecting more of a borrower's income, coupled with other proposed regulatory changes related to auto-enrollment for delinquent borrowers, would result in more low-income borrowers enrolling in IDR and in fewer defaulting on their student loans. In addition, by preventing borrowers from switching after 120 payments, we propose to give borrowers ample time to decide between making lower payments on REPAYE or the possibility of forgiveness after the equivalent of 20 years on IBR. (1) Under the REPAYE plan, during all periods of repayment on all loans being repaid under the REPAYE plan, the Secretary does not charge the borrower's account any accrued interest that is not covered by the borrower's payment; (2)(i) Under the IBR and PAYE plans, the Secretary does not charge the borrower's account with an amount equal to the amount of accrued interest on the borrower's Direct Subsidized Loans and Direct Subsidized Consolidation Loans that is not covered by the borrower's payment for the first three consecutive years of repayment under the plan, except as provided for the IBR and PAYE plans in paragraph (h)(2)(ii) of this section; (ii) Under the IBR and PAYE plans, the 3-year period described in paragraph (h)(2)(i) of this section excludes any period during which the borrower receives an economic hardship deferment under 685.204(g); and. https://doi.org/10.1111/jofi.13088. https://nces.ed.gov/datalab/. For instance, for a borrower in a one-person household, raising the amount eligible for early forgiveness from $12,000 to $19,000 would increase the amount the borrower would need to earn to not receive early forgiveness from $59,300 to approximately $77,000. As a result, for purposes of this NPRM, the Department proposes to continue defining small entities by reference to enrollment, to allow meaningful comparison of regulatory impact across all types of higher education institutions. Similarly, the rehabilitation training deferment requires a borrower to make a substantial commitment that could prevent them from working full-time, potentially resulting in a calculated IDR payment of $0. ? (1) The borrower is otherwise eligible for the plan; (2) The borrower has approved the disclosure of tax information under paragraph (l)(2) or (l)(3) of this section; (3) The borrower is in repayment and has not made a scheduled payment on the loan for at least 75 days; and. As part of the reorganization of the regulations, the Department seeks to standardize and clarify the regulations (including changes to the terms of the plans themselves), refine sections of the regulations that may be ambiguous to reflect the Department's long-standing interpretation of those regulations, and simplify the procedures and terms of the existing plans. 37. To use PDF, you must have Adobe Acrobat Reader, which is available free at the site. (2) Any Direct Loan borrower may repay under the REPAYE plan if the borrower has loans eligible for repayment under the plan; (3)(i) Except as provided in paragraph (c)(3)(ii) of this section, any Direct Loan borrower may repay under the IBR plan if the borrower has loans eligible for repayment under the plan, and has a partial financial hardship when the borrower initially enters the plan. This is a concern that already exists in current IDR plans but could increase with the more generous proposed benefits. Today, this grant is known as the Pell Grant, after it was renamed in 1980 in honor of Democratic U.S. Making the REPAYE plan more generous would help address concerns around borrower confusion, because the Department and those who provide repayment plan information to borrowers would be able to present the revised plan as the IDR option that would be most affordable for a large majority of student borrowers. would love to see 10 years of forgiveness, or 10 years to forgiveness for those who have limited income because . The holder of This section does not specifically limit the calculation to only those periods or specifically preclude the Secretary from using the regulatory authority to add additional periods. the Direct Loan Program and Direct Loans) was authorized under. The Department found that a payment rate equal to 5 percent of discretionary income would allow a single borrower with only undergraduate loans up to $75,500 in 2016 income to receive benefits. The proposed regulations at 685.209 would be amended to include regulations for all of the IDR plans. The Department has also received many comments regarding IDR or student loan interest during the rulemaking process and through the FSA Ombudsman's office. Students should complete the following steps to apply for a Federal Direct Student Loan: Complete the Free Application for Federal Student Aid ( FAFSA) Accept the desired loan (s) using the online Financial Aid Award Notification System. (d) A borrower must repay a loan under an alternative repayment plan within 30 years of the date the loan entered repayment, not including periods of deferment and forbearance. Just 1 percent of borrowers who are in default had loans only for graduate studies. Proposed Regulations: The effect of this payment pause extension on the net budget impact will be reflected in the final rule. We will prepare an Information Collection Request for the information collection requirements following the finalization of this NPRM. Family size (3) For those who are not new borrowers under the IBR plan, the borrower's monthly payments are the lesser of: (i) 15 percent of the borrower's discretionary income, divided by 12; or. Application and annual recertification procedures. Payments and interest on federally-held student loans are currently paused. Focus groups conducted by the Pew Research Center have found that interest accrual is a common source of borrower frustration and creates negative incentives for borrowers to stick with loan repayment. Section 685.209(c)(2)(ii)(B) provides that if a married borrower and the borrower's spouse each have eligible loans, the Secretary adjusts the borrower's REPAYE plan monthly payment amount by determining each individual's percentage of the couple's total eligible loan debt and then multiplies the borrower's calculated monthly payment amount by this percentage. Therefore, commenters should include in their comments only information about themselves that they wish to make publicly available. https://doi.org/10.1257/jep.7.3.193. (f) (3) All Direct Loans obtained by one borrower must be repaid together under the same repayment plan, except that, (i) A borrower of a Direct PLUS Loan or a Direct Consolidation Loan that is not eligible for repayment under an income-driven repayment plan may repay the Direct PLUS Loan or Direct Consolidation Loan separately from other Direct Loans obtained by the borrower; and. However, borrowers who meet the eligibility criteria for certain other types of deferments might similarly be expected to have a $0 payment if they were making payments under an IDR plan. Qualifying repayment plan) * * *. (Borrowers with Direct Consolidation Loans that include a Parent PLUS loan would still have access to the ICR plan.) The Department recognizes that this means some borrowers with loans for a graduate program could still have the option of choosing a plan that provides forgiveness after 20 years, such as the IBR plan for newer borrowers, which is shorter than what the Department is proposing for REPAYE. Within the IBR plan, there are two versions that are available to the borrower, depending on when they took out their loans. The proposed process would give the borrower the opportunity to submit an additional payment or payments for each month spent in deferment or forbearance at the lesser of what they would have paid on the 10-year standard plan or an IDR plan at that time. Under the modified REPAYE plan, cease charging any remaining accrued interest each month after applying a borrower's payment. Department of Education analysis of loan data by academic level for total borrower population and defaulted borrower population, conducted in FSA's Enterprise Data Warehouse, with data as of December 31, 2021. Expenditures are classified as transfers from the Federal government to affected student loan borrowers. This PDF is The proposed regulations would expand access to affordable monthly payments on the REPAYE plan by increasing the amount of income exempted from the calculation of payments from 150 percent of the Federal poverty guidelines to 225 percent of the Federal poverty guidelines, lowering the share of discretionary income put toward monthly payments to 5 percent for a borrower's total original loan principal volume attributable to loans received as students for an undergraduate program, not charging any monthly unpaid interest remaining after applying a borrower's payment, and providing for a shorter repayment period and earlier forgiveness for borrowers with smaller original principal balances (starting at 10 years for borrowers with original principal balances of $12,000 or less, and increasing by 1 year for each additional $1,000 up to 20 or 25 years). 17. WebParticipating in the William D. Ford Federal Direct Loan (Direct Loan) Program, Federal Family Education Loan (FFEL) Program, or Federal Perkins Loan (Perkins Loan) Program and giving us your SSN are voluntary, but you must provide the requested information, including your SSN, to participate. An Urban Institute analysis using the 2016 Survey of Consumer Finances found that the share of Black borrowers using IDR was lower than the share of borrowers not making any payments. A PFH means that a borrower's calculated payment on IBR had to be at or below what the borrower would have paid on the 10-year standard plan. otherwise have to wait another 10 years for forgiveness. This could result in increased costs to taxpayers in the form of transfers to borrowers if more students choose to borrow than before and/or if borrowers take out greater amounts of loans than before, but then do not fully repay their loans. Thats because the American Rescue Plan of 2021 made student loan forgiveness tax-free through 2025 and the law covers Bidens forgiveness, too, according to a fact sheet from the White House. Financial Aid Administrators at Postsecondary Institutions: borrowers with Federally managed loans enrolled in an IDR plan rose from just over one-quarter to one-third during this time.
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