We also considered multiple options for how the time to forgiveness should change with the level of additional debt. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/108am.pdf, WebTEACHER LOAN FORGIVENESS APPLICATION William D. Ford Federal Direct Loan (Direct Loan) Program Federal Family Education Loan (FFEL) Program OMB No. The Department's policy is to generally make comments received from members of the public available for public viewing at (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive Order. However, as discussed elsewhere in this notice of proposed rulemaking, a borrower would not be allowed to switch to the IBR plan after making 120 or more qualifying payments on REPAYE. Direct Stafford Loans, from the William D. Ford Federal Direct Loan (Direct Loan) Program, are low-interest loans for eligible students to help cover On average, if all borrowers in future cohorts were to enroll in the 10-year standard repayment plan or the current REPAYE plan and make all of their required payments on time, we estimate that borrowers would repay approximately $11,800 per $10,000 of debt at repayment entry in both the standard 10-year plan and under the current provisions of REPAYE. Misty Sabouneh, Southern New Hampshire University, and Terrence S. McTier, Jr. (alternate), Washington University. A borrower who only has outstanding loans for an undergraduate program would pay 5 percent of their discretionary income, and a borrower who only has outstanding loans for a graduate program would pay 10 percent of their discretionary income. This proposed regulation is intended to address these challenges for borrowers by ensuring access to a more generous, streamlined IDR plan. 601 calculation of the maximum repayment period under the ICR repayment plans. The Department of Education (Department or We) establishes new Institutional Accountability regulations governing the William D. Ford Federal Direct The current regulations for PAYE, REPAYE, and IBR, at 685.209(a)(1)(i), 685.209(c)(1)(i), and 685.221(a)(1), define adjusted gross income as the AGI as reported to the Internal Revenue Service (IRS). https://doi.org/10.1111/1756-2171.12097. This reflects concerns that borrowers may not have been getting proper credit for economic hardship deferments. Direct Loan Reconciliation Defined corresponding official PDF file on govinfo.gov. They stated that the current protection level in the PAYE and REPAYE plans of 150 percent of the poverty guideline ($20,385 for a single individual and $41,625 for a family of four in 2022) is not adequate to ensure low-income borrowers can afford their basic needs and that the amount of income protection should be increased. Would establish conforming changes based on revisions to the sections noted above. Start Printed Page 1909 (d) Direct Subsidized LoansFor eligible undergraduate students. We modeled this for undergraduate-only borrowers because we anticipate that they are the most likely to have debt balances eligible for the shortened time to forgiveness. [70] (A) For an unmarried borrower, a married borrower filing a separate Federal income tax return, or a married borrower filing a joint Federal tax return who certifies that the borrower is currently separated from the borrower's spouse or is currently unable to reasonably access the spouse's income, only the borrower's income is used in the calculation. Table 7 summarizes the change in payments between the President's budget baseline for FY 2023 as modified for waivers, broad-based debt relief, and recent regulatory packages and the proposed regulation for a representative cohort of borrowers, those entering repayment in FY 2024. The burden changes would be assessed to OMB Control Number 1845-0102, Income Driven Repayment Plan Request for the William D. Ford Federal Direct Loans and Federal Family Education Loan Programs. The BBB is warning about scammers calling to offer you student loan forgiveness deals, often using phrases like the "William D. Ford Act". 74. Regulations.gov, including instructions for finding a rule on the site and submitting comments, is available on the site under FAQ.. The Department has identified a significant need for regulatory action to promote access to more affordable repayment plans for student loan borrowers. A cohort reflects all loans originated in a given fiscal year. About the Federal Register 27. 6. The Department also considered keeping payments set at 10 percent of discretionary income for 20 years for all undergraduate borrowers and 25 years for all graduate borrowers, the cost of which is shown in Table 6 as $58.6 billion less than the full package that includes the reduction in payments. William D As can be seen in Table 6, the increase in the income protection to 225 percent of the Federal poverty guidelines and the percentage of income on which payments are based are the most significant factors in the estimated impact of the proposed changes. p. 68. Robert Ayala, Southwest Texas Junior College, and Christina Tangalakis (alternate), Glendale Community College. Public Service Loan Forgiveness (PSLF) Program Fact (iii) For the ICR plan, 100 percent of the applicable Federal poverty guideline. https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html. Modify the regulations for all IDR plans in 685.209 to automatically enroll any borrowers who are at least 75 days delinquent on their loan payments in the IDR plan for which the borrower is eligible and that produces the lowest monthly payments for them. Each of these items provide benefits in different ways. (6)(i) For any period in which a borrower was in a deferment or forbearance not listed in paragraph (k)(4)(iv) of this section, the borrower may obtain credit toward forgiveness as defined in paragraph (k) of this section for any months in which the borrower makes a payment equal to or greater than the amount the borrower would have been required to pay during that period on any IDR plan under this section, including a payment of $0. p. 28. Drawing on these results, we believe borrowers with income below 225 percent of the Federal poverty guidelines should not be expected to make loan payments. 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. With regard to parent PLUS loans, the HEA states that such loans may not be repaid under an ICR plan or the IBR plan, and Direct Consolidation Loans that repaid a parent PLUS loan may not be repaid under the IBR plan. Since amounts collected through tools such as administrative wage garnishment or the Treasury Offset Program are credited toward a borrower's balance, the Department proposes in 685.209(k)(5) that borrowers also receive credit toward IBR forgiveness for amounts collected through these means that are equal to what a borrower would have paid on the 10-year standard plan. 3) may not change to another repayment plan unless, (i) The borrower was required to and did make a payment under the IBR plan or other income-driven repayment plan in each of the prior three months; or, (ii) The borrower was not required to make payments but made three reasonable and affordable payments in each of the prior three months; and. The Department has significantly engaged the public in developing this NPRM, including through review of oral and written comments submitted by the public during four public hearings. 73. This plan may also result in changes in students' decisions to borrow and how much to borrow, which could have additional future effects on the size of transfers to borrowers. Borrowers face a maze of repayment options that may lead some borrowers to make suboptimal decisions, struggle with annual income re-certification requirements, or never enroll in an IDR plan at all and instead fall into delinquency and default. Date 8/31/2024. Please do not submit the PDF in a scanned format. The majority of entities to which the Office of Postsecondary Education's (OPE) regulations apply are postsecondary institutions, however, which do not report such data to the Department. (h) Public Service Loan Forgiveness 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. Those plans are the ICR, PAYE, and REPAYE plans. When that occurs, the IDR plans do not achieve their goals of establishing affordable payments for borrowers. Department of Education internal analysis of data for IDR borrowers who had a recertification date during the 2018 calendar year. Section 685.209 is revised to read as follows: (a) TEACHER LOAN FORGIVENESS APPLICATION - FSA Partner Technical Report GAO-17-22. The potential for these negative incentives could be even greater as a result of the increases in the amount of income protected from payments and the reduction in payments tied to undergraduate loan balances. The authority citation for part 685 continues to read as follows: Authority: This would allow many borrowers who could make payments to receive credit toward IDR forgiveness for months, if not years, when they could have been making payments. Loans Federal Register. Start Printed Page 1907 Income. Start Printed Page 1903 The proposed regulations would make the following changes to the IDR plans (685.209): Costs and Benefits: SSN. State Attorneys General: L. 116-260), which direct the IRS, upon the written request of the Department, to disclose to any authorized person tax return information to determine eligibility for recertifications for IDR plans. The protocols defined consensus as no dissent by any member of the Committee and noted that consensus votes would be taken issue by issue. The Department also recognizes that many borrowers in default may not make voluntary payments but could be subject to forced collections activity. (3), 193-201. Noelia Gonzalez, California State University. affects interest Department analysis of data from the Survey of Income and Program Participation, Census Bureau. (l) On May 26, 2021, the Department published a notice in the Jeri O'Bryan-Losee, United University Professions, and Jennifer Cardenas (alternate), Young Invincibles. (iii) A month in which a borrower makes a payment in accordance with procedures in paragraph (k)(6) of this section. Get Temporary Expanded Public Service Loan Forgiveness 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. (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. For PAYE and IBR, the AGI of married borrowers filing separately includes only the borrower's income; for REPAYE, it includes the AGI of the borrower and the spouse, unless the borrower certifies that they are separated from or unable to access the spouse's income. Federalism implications means substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have also reviewed these regulations under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. The Committee operated by consensus, which means that there must be no dissent by any member for the Committee to be considered to have reached agreement. Federal Register 39. However, students may choose to make regular or interest-only payments while enrolled. publication in the future. Email (Optional) Telephone - Alternate. The Department believes that, despite the additional costs to taxpayers of the proposed REPAYE plan, both borrowers and the Department would greatly benefit from a plan that helps borrowers avoid delinquency and default, which are loan statuses that create additional challenges, costs, and administrative complexities for collection, as well as carry additional consequences for borrowers. WebSERV. Electronic Access to This Document: (2015). Proposed 685.209(m)(3) would provide that any student borrower who is at least 75 days delinquent on their loan payments would be automatically enrolled in the IDR plan that results in the lowest monthly payment based on the borrower's income and family size, as long as the borrower has provided approval for the disclosure of tax information, the borrower otherwise qualifies for the plan, and that the IDR plan would lower the borrower's payment. Similarly, the Department is concerned about borrowers being able to successfully navigate between the cancer treatment deferment and IDR when they are ill and undergoing necessary medical care. At this level, the REPAYE plan would continue to protect the amount a single minimum-wage worker with no dependents would earn in every State in 2023. In such cases, the 12-month period specified under paragraph (l)(5) of this section is reset based on the borrower's new information. [61] Register documents. Start Printed Page 1901 Direct Student Loan Program (f) 1070g, 1087a, For unsubsidized loans, the current REPAYE plan interest subsidy benefit covers 50 percent of the remaining interest during all years of repayment under the plan. That rule did not eliminate interest capitalization when a borrower leaves the IBR plan, including if they fail to recertify. Those same focus groups found that interest accrual created psychological and financial barriers to repayment, as borrowers lost motivation to repay and felt that they were trapped in debt indefinitely. This is the only federal student loan program currently authorized and available to students. Telephone: (202) 987-0315. The plan is also limited to those who borrowed after October 7, 1998. Adding these benefits solely to the REPAYE plan would move in the direction of having one IDR plan that is the most beneficial for almost all borrowers, thereby simplifying loan counseling and servicing and making it easier for borrowers to understand which plan is best for them. Would reduce monthly payment amounts to 5 percent of discretionary income for the share of a borrower's total original principal loan volume attributable to loans received as students for an undergraduate program (with a weighted average between 5 and 10 percent for borrowers with outstanding undergraduate and graduate loans, and a payment of 10 percent for borrowers with only outstanding graduate loans), increase the amount of discretionary income exempted from the calculation of payments to 225 percent of the Federal poverty guidelines, not charge any unpaid monthly interest after applying a borrower's payment, and reduce the time to forgiveness under the plan for borrowers with lower original balances. (2) Under the IBR plan, the Secretary capitalizes unpaid accrued interest, (ii) When a borrower's payment is the amount described in paragraphs (f)(2)(ii) and (f)(3)(ii) of this section; and. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/dec9pm.pdf. Automatic enrollment in an IDR plan. Would house all IDR plans under this section and establish new terms for the REPAYE plan. Medical or Dental Internship/Residency, National Guard Duty, or Department Form Approved. (m) Loans 36. This negative value indicates that the element has a cost when included, by reducing transfers from borrowers to the government and taxpayers. Repayment Research shows that low-income borrowers and borrowers with high debt levels relative to their incomes enroll in IDR plans at lower rates. Overall, the Department thinks the benefits from simplification exceed the potential higher costs for these borrowers. Borrowers Discuss the Challenges of Student Loan Repayment. Start Signature For the income analysis, we looked at what a one-, two-, and four-person household would have needed to earn in 2020 to pay off a $12,000 loan at a 5 percent interest rate in 10 years, assuming that all of their debt was for an undergraduate program, they maintained that household size, and their income rose exactly with the Federal poverty guidelines during this period. Rajeev Darolia, University of Kentucky, for issues related to economic and/or higher education policy analysis and data. On August 24, 2022, President Biden announced that the U.S. Department of Education will fulfill the Presidents campaign promise to forgive federal student loans. This change to the interest benefits would also remove a significant tradeoff for borrowers between choosing an IDR plan or one of the fixed repayment plans, none of which allow for monthly payments that are less than the amount of interest that accrues each month. The proposed regulations would make additional improvements to help borrowers navigate their repayment options by allowing more forms of deferments and forbearances to count toward IDR forgiveness. We believe that many borrowers did not understand that, by taking out a deferment or forbearance, they were delaying the time in which they could have the loan forgiven. Limiting interest accumulation would also increase the attractiveness of IDR relative to a discretionary forbearance. Loan Forgiveness . PDF. The next income-contingent repayment plan, the PAYE repayment plan, became available on July 1, 2013. [29] 17. Moreover, the fact that borrowers have gone delinquent on their payments suggests that payments on their current repayment plans may be unaffordable. Overall, the Department's goal in providing credit toward forgiveness for some of these deferments and forbearances is to avoid situations in which a borrower is presented with conflicting benefits, in these cases an opportunity to pause payments or make progress toward ultimate loan forgiveness. Public Service Loan Forgiveness Program (PSLF). the current or proposed REPAYE plan) and make their scheduled payments. Published 9:29 AM PDT, May 10, 2023. https://www.pewtrusts.org/-/media/assets/2020/05/studentloan_focusgroup_report.pdf; https://static.newamerica.org/attachments/2358-why-student-loans-are-different/FDR_Group_Updated.dc7218ab247a4650902f7afd52d6cae1.pdf. Under the graduated repayment plan, a borrower is required to repay the loan in full within 10 years from the date the loan entered repayment, or between 10 and 30 years if the loan is a Direct or FFEL Consolidation loan. Travis Plunkett, Regan Fitzgerald, Lexi West, Many Student Loan Borrowers Will Need Help When Federal Pause Ends, Survey Shows (July 15, 2021), et seq. Finally, excluding spousal income under all IDR plans for borrowers who file separate tax returns would create a process that is more streamlined and simplified when it comes to borrowers enrolling in an IDR plan. Federal Register Zip CodeAddress Name. Proposed 685.209(h) would address how the Secretary charges the remaining accrued interest to a borrower if the borrower's calculated monthly payment under an IDR plan is insufficient to pay the accrued interest on the borrower's loans. This may help more borrowers to enroll in this affordable repayment plan, and may then reduce student loan delinquencies and defaults, to the benefit of the Department and of taxpayers. Ultimately, they argued, repayment of student loans is the responsibility of the borrower. Similarly, just 5 percent of borrowers who only have graduate debt are in default on their loans, compared with 19 percent of those who have debt from undergraduate programs. would love to see 10 years of forgiveness, or 10 years to forgiveness for those who have limited income because . The proposed increased benefits on the REPAYE plan, including reduced monthly payments, a shorter repayment period for some borrowers, and not charging unpaid monthly interest, all represent costs in the form of transfers to borrowers. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/107pm.pdf, Department data from 2019 show that 39 percent of borrowers on an IDR plan recertified on time and that only 57 percent had certified within 6 months after their recertification deadline. The Department strongly encourages you to submit any comments or attachments in Microsoft Word format. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/index.html. While every effort has been made to ensure that and the most common complaint received by the Department from borrowers on the structure of IDR plans is that their payments are still unaffordable on those plans. Not surprisingly then, approximately two-thirds of borrowers who obtained a bachelor's degree in 2015-16 also received a Pell Grant.[25]. (3) The following loans are eligible to be repaid under the ICR plan: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and all Direct Consolidation Loans (including Direct Consolidation Loans that repaid Direct parent PLUS Loans or Federal parent PLUS Loans), except for Direct PLUS Consolidation Loans made before July 1, 2006. This would ensure all the relevant information is available to borrowers and other stakeholders in a single location in the regulations. Those plans relied on traditional tools like extending the repayment period and allowing for lower initial payments that increase on a set schedule over time. (B) Began repaying under the ICR plan before the effective date of these regulations and wishes to continue repaying under the ICR plan. Department data on borrowers in default as of December 31, 2021 show that 90 percent of borrowers who are in default on their Federal student loans had only borrowed for their undergraduate education. LOANS Long Beach City College participates in the William D. Ford Federal Direct Loan Program (Direct Loans). Monthly payment or the equivalent He proposed cancelling $10,000 to $20,000 in student loans for qualifying borrowers, as well as rapidly implementing a new student loan repayment plan. Loan H. If I consolidate my loans, I may no longer be eligible for certain deferments, subsidized deferment periods, certain types of loan discharges notice published annually to account for inflation; or. Includes all Federally managed loans across all IDR plans, measured in Q4 2016 through Q1 2022. Second, the Department is more concerned about the potential for undergraduate borrowers to struggle with delinquency and default than it is for graduate borrowers. Repayment Borrowers in the first quintile are projected to have lower lifetime earnings than at least 80 percent of all borrowers in the cohort, while those in the top quintile are projected to have higher earnings than at least 80 percent of all borrowers.
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