A House bill introduced yesterday, the SIMPLE (Streamlining Income-driven, Manageable Payments on Loans for Education) Act , would auto-enroll delinquent borrowers in an income-driven repayment (IDR) plan and automatically recertify income and family size on an annual basis for borrowers already enrolled in IDR plans.
The bipartisan bill, introduced by Reps. Suzanne Bonamici (D-OR) and Ryan Costello (R-PA) and supported by NASFAA, would authorize the Department of Education (ED) to obtain tax returns from the Internal Revenue Service (IRS) for borrowers who are 60 days delinquent, and notify the borrowers of their repayment plan options, including calculated monthly payment amounts. If the borrower does not select a new repayment plan, ED would automatically place the borrower in an IDR plan if the delinquency continues beyond 120 days.
Borrowers would retain the right to change their repayment plan at any time, and would have the right to opt out of auto-enrollment earlier in the loan process. As currently written, the legislation would apply only to new borrowers.
In response to almost 60 percent of borrowers in IDR plans failing to promptly recertify their income and family size after the first year in an IDR plan, the bill also contains a provision that would permit automatic, annual recertification of income and family size for all borrowers enrolled in income-driven repayment plans. For borrowers currently enrolled in an IDR plan, the automatic recertification would be an opt-in provision, and for borrowers who enroll in an IDR plan on or after the date of enactment, the automatic recertification would be an opt-out provision.
If the bill is enacted, ED and the Department of Treasury must first conduct a feasibility study exploring the use of IRS deductions for personal exemptions as a proxy for family size. ED must then use the results of the study to develop procedures for determining family size in the implementation of auto-enrollment and auto-certification. Negotiated rulemaking would also be required.
In the past, NASFAA has been supportive of the concepts of auto-enrollment in IDR plans for delinquent borrowers and auto-certification for IDR plans. We look forward to continued conversations over the coming months as the bill is refined before likely being reintroduced in the new Congress.
Publication Date: 9/9/2016