To compare the potential benefits for future borrowers from the proposed REPAYE plan, these simulations abstract from repayment plan choice and instead assume that all future borrowers enroll in a given plan ( (1) The following loans are eligible to be repaid under the REPAYE and PAYE plans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and Direct Consolidation Loans that did not repay a Direct parent PLUS Loan or a Federal parent PLUS Loan; (2) The following loans, including defaulted loans, are eligible to be repaid under the IBR plan: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and Direct Consolidation Loans that did not repay a Direct parent PLUS Loan or a Federal parent PLUS Loan. 1221e-3) provides the Secretary with authority to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of operations of, and governing the applicable programs administered by, the Department. www.regulations.gov, Date 09/30/2023 to consider proposed regulations for the Federal student financial aid programs authorized under title IV of the Higher Education Act of 1965, as amended (title IV, HEA programs). By contrast, the difference in starting incomes that would benefit from the shortened time to forgiveness would be too large when using an increment of an extra year for every $1,500 or $2,000. 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. 15. (m) As required by OMB Circular A-4, we compare the proposed regulations to the current regulations. The proposed regulations would streamline and standardize the Direct Loan Program repayment regulations by categorizing existing repayment plans into three types: fixed payment repayment plans, which are plans with monthly payments based on the scheduled repayment period, loan debt, and interest rate; IDR plans, which are plans with monthly payments based in whole or in part on the borrower's income and family size; and the alternative repayment plan, which is only used on a case-by-case basis when a borrower has exceptional circumstances. 1845-0018. Limiting new enrollments in older IDR plans. 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]. [57] https://www.census.gov/programs-surveys/sipp.html. Public Service Loan Forgiveness (PSLF) & Temporary 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. Moreover, the borrowers not using the IDR plans appear to have significantly lower incomes than those who are enrolled. Federal Student Loans Made Under the Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program: Terms and Conditions for Borrowers (archived). Notwithstanding any other provision of law, no person is required to comply with, or is subject to penalty for failure to comply with, a collection of information if the collection instrument does not display a currently valid OMB control number. (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. 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. Pursuant to the Congressional Review Act (5 U.S.C. 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. low balances, and not charging any remaining accrued interest each month after applying a borrower's payment. WebSERV. [44] 804(2). If, for example, your comment describes an experience of someone other than yourself, please do not identify that individual or include information that would allow readers to identify that individual. This helps ensure that the public understands the Department's collection instructions, respondents can provide the requested data in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the Department can properly assess the impact of collection requirements on respondents. Because graduate borrowers generally have higher loan balances than undergraduate borrowers, if an undergraduate borrower and graduate borrower have the same income level, it is highly likely that the latter will have significantly larger reductions in Loans William D WebPAGE 1 OF 14 11/2019 Master Promissory Note (MPN) Direct Subsidized Loans and Direct Unsubsidized Loans William D. Ford Federal Direct Loan Program WARNING: Any person who knowingly makes a false statement or misrepresentation on this form or any accompanying document is subject to penalties that may include fines, imprisonment, or 42. is Obama Student Loan Forgiveness OMB No. William D Of greater concern would be the possibility that providing assistance for borrowers through the updated REPAYE plan would result in more aggressive recruiting by institutions that do not provide valuable returns on the premise that borrowers who do not find a job do not have to pay. Taking Out and Repaying Student Loans: A Report on Focus Groups with Struggling Student Loan Borrowers. Using these projections, payments under a given loan repayment plan can be calculated for the full length of time between repayment entry and full repayment or forgiveness. 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. Federal Register WebEligible Loans: Defaulted William D. Ford Federal Direct Loan (Direct Loan) Program loans; Defaulted Federal Family Education Loan (FFEL) Program loans (both ED-held and commercial held) Defaulted ED-held Perkins Loans; Loans Not Eligible: Defaulted school-held Perkins Loans; Defaulted Health Education Assistance Loan Program loans 01/10/2023 at 8:45 am. The term income-driven repayment is not used in the current regulations. Date 9/30/2020. 9. The Department held negotiated rulemaking related to this NPRM. According to a 2012 U.S. Treasury study, 70 percent of defaulted borrowers have incomes that would have allowed them to reduce their payments compared to the standard 10-year repayment plan by going onto IDR; these payment reductions could have reduced the likelihood of default. William D. Ford Federal Direct Student Loans - ESF [17] Next, the Department performed the same calculation for a borrower with the median undergraduate debt amount of $20,062, varying the discretionary income amount in whole percentage points in descending order from 10 percent. The proposed IDR plan regulations would benefit multiple groups of stakeholders, especially Federal student loan borrowers. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/dec7pm.pdf, Web1. Federal Register In 685.102, in paragraph (b) amend the definition of satisfactory repayment arrangement by revising paragraph (2)(ii) to read as follows: (b) * * * The Department proposes to grant borrowers access to IBR as permitted by section 493C of the HEA. a. Revising the heading of paragraph (a). 72. 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. Another study estimated that the benefitsthe welfare gainsof moving from a loan system without IDR plans to a system with IDR plans, if ideally implemented, are significant, ranging from about 0.2 percent to 0.6 percent of lifetime consumption.[68]. It is not an official legal edition of the Federal 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. Under the standard repayment plan, borrowers are required to repay their loans in full within 10 years from the date the loan entered repayment by making fixed monthly payments, or between 10 and 30 years if the loan is a Direct or Federal Family Education Loan (FFEL) Program Consolidation Loan. Direct Loans are loans that are funded and owned by the U.S. Department of Education through the William D. Ford Federal Direct Loan (Direct Loan) Program. The proposed collection associated with this NPRM is 1845-0102. Would limit new enrollments in PAYE after the effective date of these regulations, limit enrollments in IBR to borrowers who have a partial financial hardship and have not made 120 payments on REPAYE and would limit new enrollments in the ICR plan after the effective date of the regulations to borrowers whose loans include a Direct Consolidation loan that included a parent PLUS loan. Single individuals without dependents at 225 percent of the poverty line make around $15 an hour, assuming they work full-time all year. As a result, many borrowers make their required payments each month but still see their balances continue to grow. please contact the program contact person listed under We are concerned these factors may lead borrowers not to enroll in IDR plans, even when it would make their payments more affordable and help them to avoid delinquency and default. Participating 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. The Department also proposes to stop resetting progress toward IDR loan forgiveness when a borrower consolidates their loans after making payments that qualify for forgiveness under an IDR plan. 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. Document page views are updated periodically throughout the day and are cumulative counts for this document. Loan Forgiveness Journal of Public Economics, 138, 1-21. The Department proposes to remove provisions related to the ICR plan, the alternative repayment plan, and the IBR plan from 685.208(k), (l), and (m), and to remove the regulations governing the IBR plan from 685.221. https://studentaid.gov/data-center/student/portfolio. Proposed 685.209 contains information collection requirements. A cohort reflects all loans originated in a given fiscal year. Of those who owed more than they originally borrowed, the median borrower owed 119 percent of their original balance. a deferment or forbearance for which they qualify or losing out on progress toward forgiveness. The Department also proposes several additional changes that would help borrowers in default benefit from IDR. This document has been published in the Federal Register. means either, (i) The borrower's and, if applicable, the spouse's, Adjusted Gross Income (AGI) as reported to the Internal Revenue Service; or. 3506(c)(2)(A)). [23] For many borrowers, enrolling in an IDR plan reduces monthly payments and allows them to use such savings to address current needs. (c) For loans issued between July 1, 2022, and June 30, 2023, the following interest rates apply: Direct subsidized: 4.99%. 38. of the student loan repayment system and the challenges of navigating multiple IDR plans, we instead propose to reform the current REPAYE plan to provide greater benefits to borrowers.[10]. This would ensure that lower-balance borrowers would not be worse off for having chosen IDR. WebThe William D. Ford Federal Direct Loan (Direct Loan) Program includes Federal Direct Stafford/Ford (Direct Subsidized) Loans, Federal Direct Unsubsidized Stafford/ Ford (Direct Unsubsidized) Loans, Federal Direct PLUS (Direct PLUS) Loans, and Federal Direct Consolidation (Direct Consolidation) 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. The average borrower with graduate debt, whose incomes and debt levels tend to be higher, is projected to have much smaller reductions in payments per $10,000 borrowed, from $11,995 under the 10-year standard plan and $12,506 under the current REPAYE plan to $11,645. Table ID: iyaord. Student Loan Information 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. Under 685.209(c)(4), the Department also proposes to modify the eligibility requirements of the ICR plan to limit eligibility for this plan to borrowers currently enrolled in the ICR plan as of the effective date of the regulations, or to borrowers whose loans include a Direct Consolidation Loan that repaid a Parent PLUS loan. Journal of Economic Perspectives, 7 This is an application for a total and permanent disability (TPD) discharge of your Direct Loan, FFEL, and/or 18. That means if a borrower decides those plans are no longer for them or they fail to recertify on time, they will not see their principal balance grow. 25. Finally, the Department proposes to simplify the complex rules relating to the different IDR plans to the extent allowable by making the REPAYE plan the best choice for most borrowers and by limiting student borrowers already Students are not required to make payments on either type of loan while These benefits include the larger amount of income protected from payments, not charging borrowers any remaining accrued interest after applying their monthly payment, and counting time spent in several deferments and forbearances toward forgiveness. Section 685.210(a)(2) authorizes the Secretary to designate the standard repayment plan for a borrower who does not select a plan before they enter repayment. Table 4Maximum Monthly Payment Savings at Different Levels of Income Protection, 2022 Federal Poverty Guidelines (FPL). LOAN FORGIVENESS Once their payment hits $0 they cannot receive any greater savings under the new plan. William D That rule did not eliminate interest capitalization when a borrower leaves the IBR plan, including if they fail to recertify. FOR FURTHER INFORMATION CONTACT By assuming IDR borrowers take the plan with the lowest long-run cost, this generates a higher-end estimate of the Thus, the Department believes that the threshold for early forgiveness would be well aligned with the distribution of income for households that have at least some postsecondary education. The proposed regulations would also automatically allow the Department to enroll any borrowers who are at least 75 days delinquent on their loan payments and who have previously provided approval for the IRS to share their income information into the IDR plan that is most affordable for them.