After many redrafts of the regulatory text, negotiators reached consensus on the negotiated rulemaking package that includes REPAYE, a new income-driven repayment plan for Federal Direct Loan borrowers.
The consensus hinged on a compromise proposal offered by NASFAA member Helen Faith, director of financial aid at Lane Community College in Eugene, Oregon, mid-way through the final day of negotiations. Federal and nonfederal negotiators were sharply divided on a suggestion from the Department of Education (ED) to tier loan forgiveness between 20 and 25 years, based on the amount of debt a borrower owed when initially entering REPAYE. After ED insisted that tiered loan forgiveness was not negotiable, nonfederal negotiators proposed several alternative ways to structure the tiered loan forgiveness, including stratifying it between undergraduate and graduate loans, or tying it to total amount borrowed, rather than owed. ED, citing budget constraints, did not accept either and stood by its initial proposal to offer forgiveness after 20 years for borrowers with an outstanding balance of $57,500 or less when they initially entered REPAYE and 25 years for borrowers with an outstanding balance greater than $57,500 when they initially entered REPAYE.
But a compromise presented by Faith proved to appease all parties: borrowers with only undergraduate debt will be granted forgiveness after 20 years. Borrowers with any graduate debt -- whether on its own or in combination with undergraduate debt -- will pay down their loans for 25 years before forgiveness.
The solution will be both a money saver for the federal government and a move toward greater simplicity for students and financial aid administrators, negotiators agreed.
“I like the plan because I can explain it to a student,” NASFAA member Pat Hurley, associate dean of student financial services at Glendale Community College in Glendale, California, said. “It’s understandable. Students get lost in the [complexity] and I think that’s why some of them default.”
Federal negotiators thanked the others around the table, who included seven NASFAA members, for their hard and sincere work throughout the negotiated rulemaking process -- a collaboration they noted is often rare on committees and was especially pivotal in crafting REPAYE.
“I believe we are all working in good faith to serve the neediest borrowers and I’m excited to be a part of that,” said NASFAA member Marian Dill, director of financial aid at Lee University in Cleveland, TN.
In closing remarks, several school-based negotiators said that while the proposed REPAYE is not a perfect repayment plan, it will be a good option for many struggling borrowers. They also stressed that additional necessary improvements to the loan process include granting financial aid administrators the authority to require additional loan counseling and limiting borrowing for certain categories of students.
Since the committee reached consensus, ED is bound to publish the language on which the group agreed as proposed rules in the Notice of Proposed Rulemaking (NPRM), expected to be released in early July. ED will accept public comments on the NPRM and plans to publish final rules by November 1, 2015.
ED then expects to implement REPAYE in December 2015, in accordance with President Obama’s mandate to expand the Pay As You Earn (PAYE) program. All other components of the final rules package will be implemented on July 1, 2016.
Publication Date: 5/1/2015