Even as negotiators continued to advocate against ED’s proposal for another student loan repayment plan (PAYE2), they worked through possible issues for an extended rulemaking agenda Wednesday during the second day of negotiated rulemaking.
Many negotiators echoed suggestions from Tuesday to use the sessions to modify the existing Pay As You Earn (PAYE) plan to allow more borrowers in and at the same time possibly change the terms of PAYE, rather than to create an additional plan on the already-lengthy menu of repayment options. ED, whose proposal centered on the creation of PAYE2 while retaining the current PAYE, will consider a shift in regulatory focus before the second negotiating session next month.
ED will also consider five of the 14 additional items negotiators proposed for inclusion in the final rulemaking agenda. While tentatively agreeing to negotiate the five items, ED officials will gather more information on the feasibility of implementing each before drafting a final agenda, now slated for release in late March.
The five proposals with conditional status are:
1. “Warm transfer” from loan rehabilitation: Lenders and servicers would be able to share a borrower’s income documentation and family size information gathered during the loan rehabilitation process with a borrower’s new servicer after transitioning out of loan rehabilitation. This would allow borrowers with newly rehabilitated loans quicker access to income-driven repayment plans and hopefully prevent the borrower from defaulting again. Negotiators would also consider whether borrowers could continue to make the “reasonable and affordable” monthly payment established during the rehabilitation process for a certain period of time while they select a new repayment plan.
2. Technical changes: As noted by a negotiator representing legal assistance organizations that represent students, there are two items already in statute that are not currently included in the regulations: lowering rehabilitation collection fees from 18.5 percent to 16 percent, and a provision regarding the sale of defaulted loans before rehabilitation.
3. Participation rate index (PRI) appeals for cohort default rates (CDRs): NASFAA member Pat Hurley’s proposal would allow a school to appeal CDRs based on low participation rates before sanctions set in for the institution. NASFAA members on the committee noted that this change could encourage community colleges to continue participation in the federal student loan programs.
4. Lump sum payments from the Department of Defense (DoD): This proposal would count lump sum payments to servicemembers as separate qualifying payments for the purposes of various loan forgiveness programs. This change would treat lump sum payments from DoD in the same manner as those from Americorps and the Peace Corps.
5. Required PAYE renewal notifications to borrowers: Given that approximately 40 percent of borrowers enrolled in PAYE do not re-enroll in PAYE after the first year in a timely manner, negotiators will consider ways to improve the notification process.
ED canceled Thursday’s scheduled negotiated rulemaking meeting and will release a final agenda before the committee reconvenes from March 31-April 2.
Publication Date: 2/26/2015