A bipartisan group of lawmakers last week introduced bicameral legislation that would aim to rein in student loan defaults by automatically enrolling delinquent borrowers in income-driven repayment (IDR) plans and streamlining the renewal process.
The SIMPLE Act – Streamlining Income-driven, Manageable Payments on Loans for Education – was introduced in the House by Reps. Suzanne Bonamici (D-OR), Ryan Costello (R-PA), Seth Moulton (D-MA), and Patrick Meehan (R-PA), and in the Senate by Sen. Ron Wyden (D-OR). Bonamici previously introduced a bill by the same name last summer. The bill is supported by several higher education organizations, including NASFAA.
Bonamici said in a statement that the legislation "will protect many people from default by making these plans easier to access and by eliminating unnecessary paperwork requirements."
"Importantly, this legislation will bring relief to some of the most vulnerable student loan borrowers, those whose loans have been discharged because of total and permanent disability," she said. "The SIMPLE Act is one important step toward reducing the burden of student debt that is holding back so many people in our country."
Organizations like the Consumer Financial Protection Bureau (CFPB) and the Government Accountability Office (GAO) have in the past suggested income-driven repayment plans have been underutilized, perhaps due to the application process for enrolling in the first place, as well as the annual re-certification process in which borrowers must again submit employment and earnings information.
According to a fact sheet on the SIMPLE Act, the bill would solve that problem by eliminating the paperwork associated with enrolling in IDR plans and instead establish an information-sharing system between the Department of Education (ED) and the U.S. Treasury to automatically enroll certain types of borrowers.
For example, borrowers who have demonstrated they are totally and permanently disabled would be automatically verified for continued eligibility during a three-year income monitoring period. Borrowers more than 120 days delinquent on their loans would be automatically enrolled in an IDR plan if they do not act on targeted information, and defaulted borrowers would be automatically enrolled in an IDR plan after loan rehabilitation to reduce the rate of re-default. Finally, the bill would eliminate the annual renewal paperwork requirement for borrowers already enrolled in IDR plans.
ED and Treasury had already come to an agreement to automate the annual recertification process, according to Inside Higher Ed. The two agencies issued a Memorandum of Understanding in January intended to result in the creation of an information-sharing system.
Editor's Note: This article has been updated to correct at what point borrowers would be automatically enrolled in IDR under the SIMPLE Act.
Publication Date: 8/7/2017