On Dec. 3 the Department confirmed its intent to retain the current debt-to-income ratio pathway for borrowers to qualify for an economic hardship deferment in both the FFEL and Direct Loan programs. Many in higher education - mostly from the medical field - expressed concern that students would no longer qualify for an economic hardship deferment during the period between when the debt-to-income ratio provisions were eliminated by the College Cost Reduction and Access Act (CCRAA) and the implementation of the new income-based repayment plan in July 2009. This confirmation resolves these concerns by assuring that debt-to-income ratio will still be used as a factor in approving economic hardship deferments.

On Oct. 24, 2007 the American Medical Association (AMA) sent a letter to Education Secretary Margaret Spellings urging the Department to postpone a provision included in the CCRAA that eliminates the "20/220 pathway" for economic hardship deferment.

"Prior to the CCRAA, a medical resident could qualify for the economic hardship deferment if he/she was employed full-time and his/her federal education debt burden was equal to or greater than 20 percent of his/her monthly income, and his/her income minus the education debt burden was less than 220 percent of the greater of the minimum wage rate or the federal poverty line for a family of two ('20/220 pathway')," explained the AMA letter.

The Association of American Medical Colleges also sent a letter to the Secretary urging her to temporarily extend the debt-to-income ratio pathway of the economic hardship deferment until the new income-based repayment program takes effect in 2009 and to allow current participants in the economic hardship deferment to finish out their remaining years of eligibility. The AAMC also asked the Secretary to continue using the 20/220 pathway.

A Dec. 3 letter to Association of American Medical Colleges President Darrell G. Kirch, Assistant Secretary of Education Diane Auer Jones stated, "The Department anticipated this concern upon passage of the CCRAA and determined that we retain the authority to use debt-to-income ratio as a primary factor in establishing additional regulatory criteria for an economic hardship deferment..."

"Accordingly, until the Department regulates further in this area, the provisions in 34 CFR 682.210(s)(6)(iv) and (v)... have been retained," said Jones.

By Justin Draeger
NASFAA Assistant Director for Communications

Posted 12/18/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.