During negotiated rulemaking Wednesday, Department of Education (ED) officials released new plans on pilot studies to identify the most effective communications to borrowers in income-driven repayment (IDR) plans, as well as data on current IDR plan renewal rates.
According to data from the six largest federal servicers from November 2013 to October 2014, more than 56 percent of borrowers in IDR plans did not recertify their income and family size on time, ED officials said. About 31 percent of late certifiers “went into a hardship related forbearance or deferment” after missing the deadline.
The two new pilot studies, designed in accordance with President Obama’s Student Aid Bill of Rights, will attempt to “improve communication to borrowers in IDR plans and ensure a smooth, on-time renewal process.” The first pilot is scheduled to begin this month and will test the effects of emails sent to borrowers from ED, in addition to currently required servicer notifications, reminding them to renew their income-driven repayment plan income documentation and family size, along with a link to the StudentLoans.gov income-driven repayment plan application. The emails will be sent to cohorts of borrowers with IDR anniversary dates in July.
Another pilot, which will conclude by September 2015, will target borrowers with anniversary dates in August and September. Instead of regular servicer notifications, those borrowers will receive communications from ED to determine whether emails sent from a government address have greater efficacy than emails from servicers. In its report, the Servicing Issues Task Force convened by NASFAA and the National Direct Student Loan Coalition recommended that servicer branding be removed from all communications.
ED officials said they also hope to get clearance to incorporate other forms of communications, including text messaging, into the pilot studies, directed by Federal Student Aid (FSA) and the White House Social and Behavioral Sciences Team (SBST). They also said they plan to make permittable data public and share best practices identified with the Federal Family Education Loan (FFEL) community.
Negotiators Wednesday also debated differing drafts from ED and negotiators representing servicers on how to regulate a “warm transfer” from loan rehabilitation. Both drafts share the goal of facilitating a smooth transition for borrowers out of rehabilitation and into regular repayment status but differ slightly on the preferred manner of accomplishing this in regulation. ED plans to release revised draft regulations on the topic Thursday, along with draft text on use of the Department of Defense’s Manpower Data Center (DMDC) database to identify servicemembers with FFEL loans who are eligible for benefits under the Servicemembers Civil Relief Act (SCRA), as well as draft text on allowing lump sum payments from the Department of Defense to count as separate payments for the purposes of loan forgiveness. Negotiators Thursday will also discuss ED’s proposal on participation rate index challenges and appeals for cohort default rates. Stay tuned to Today’s News for more.
Publication Date: 4/2/2015