Even with far fewer (and less contentious) agenda items this year, the student loans negotiated rulemaking is shaping up to be a lot like last year's loan negotiations with extra innings already scheduled for next month. Negotiators have not reached consensus and a fourth meeting will try to get negotiators to reach agreement on a few remaining issues. Currently, the inability to reach consensus falls on five issues.
First, some nonfederal negotiators want the Department to consider payments made prior to July 1, 2009, as eligible payments for loan forgiveness under the income-based repayment (IBR) plan. Payments made on or after July 1, 2009, in the income sensitive, graduated, or extended repayment plans count toward the 25-year repayment period needed for loan forgiveness. Payments made under the standard repayment plan also count toward the 25-year repayment period. The proposed draft regulations also stipulate that periods of economic hardship deferment will also count toward the 25-year repayment period needed for forgiveness. The Department is unwilling to change the proposed regulations to include retroactive payments made prior to July 1, 2009.
Second, lender negotiators object to the Department's interpretation of the special allowance payments (SAP) calculation for loans in the IBR plan. The CCRAA modified this calculation. Lenders believe that they should receive a yield on both principal and interest, but the Department's interpretation does not apply SAP to accrued interest. The result is that in some cases lenders would receive little or no SAP from the Department and could ultimately result in lenders owing money to the Department.
Third, negotiators could not come to tentative agreement on the definition of a not-for-profit lender. Much of the discussion on the matter took place during caucuses, but lender negotiators were particularly concerned that little of their suggested regulatory language was accepted by the Department. The Department admitted that it was having a difficult time understanding the nonprofit funding and governance models and needed additional time to examine lender negotiators' suggestions.
Fourth, several nonfederal negotiators object to the idea that the definition of qualified employment for public service loan forgiveness includes the words "directly employed." Removing that verbiage would help workers who perform public service work, but are under contracts with local communities, qualify for loan forgiveness. The current proposed draft regulations require borrowers to be directly employed in a full-time public service job. That would exclude lawyers, health care professionals, and others who are performing public service work, but are employed as an independent contractor or by a contractor funded by a local or state government.
Fifth, some nonfederal negotiators object with the Department's definition of public interest law services, calling it too limiting in nature.
Negotiated rulemaking on these student loan issues concludes today. NASFAA will provide a comprehensive summary of the discussions of this round after its conclusion.
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 03/06/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
