PAYE Negotiators Urge IRS to Implement Multi-Year Income Documentation for Income-Driven Repayment Plans

By Karen McCarthy, Policy & Federal Relations Staff 

In a letter to the Department of the Treasury and the Internal Revenue Service (IRS), a group of non-federal negotiators from this spring’s Pay As You Earn (PAYE) negotiated rulemaking urged the IRS to work with the Department of Education (ED) to quickly develop and implement a process to allow borrowers to provide preemptive, multi-year consent for ED and the Federal Family Education Loan Program (FFELP) loan holders to access their tax information for the limited purpose of determining eligibility and/or monthly payment amounts for income-driven repayment plans.

During this spring’s PAYE negotiations, ED shared data from the six largest federal loan servicers from November 2013 to October 2014 showing that more than 56 percent of borrowers in income-driven repayment plans did not recertify their income and family size on time.

Citing these data as an indicator of the urgency of improving the process of updating income information in these repayment plans, negotiators raised the prospect of a multi-year income verification process. Although the concept was generally supported around the negotiating table, such a proposal would require collaboration between the IRS and ED and thus, cannot be achieved solely through the negotiated rulemaking process. After the conclusion of negotiations, a significant majority of the non-federal negotiators developed the letter to Treasury and the IRS to express their support for the concept.

Multi-year consent for income verification was also included in President Obama’s Student Aid Bill of Rights, unveiled in March. By October 1, 2015, ED and Treasury must submit a report to the administration on the feasibility of developing a system to give borrowers the opportunity to authorize the IRS to release income information for multiple years for the purposes of automatically determining monthly payments under income-driven repayment plans.


Publication Date: 6/26/2015

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