By Owen Daugherty and Hugh T. Ferguson, NASFAA Staff Reporters
The Department of Education’s (ED) negotiated rulemaking committee delved into topics concerning income-driven repayment plans (IDR) and Public Service Loan Forgiveness (PSLF) during Tuesday’s session.
The morning session primarily focused on discussion surrounding ED’s IDR issue paper where Jennifer Hong, a negotiator on behalf of the department, provided a detailed explanation.
In her explanation, Hong highlighted that ED proposed allowing a borrower’s payments made while in default to count as monthly payments under the Income-Based Repayment (IBR) plan because doing so allows them to also make progress toward forgiveness, which ED currently cannot do under income-contingent repayment (ICR) or Expanded Income-Contingent Repayment (EICR). ED also added several categories of deferment to satisfy the monthly payment for all IDR plans.
ED’s proposal is to limit the new IDR plan, EICR, to loans borrowed for undergraduate study, and to subsidize interest on subsidized loans that isn’t covered by the borrower’s monthly payment. The new plan would set a marginal rate of income assessed in the calculation of monthly payments, and would grant forgiveness after 20 years of repayment.
Hong made it clear that ED’s priorities on this issue were to ensure that vulnerable borrowers were better protected by aiming to lessen the burden of repayment.
“It’s lower payments every month, and it is an attempt to both try and target the borrowers that we want to target,” Hong said. “We’ve said from the outset what we were interested in, we are interested in those lower balance, lower-income ... and undergraduates to keep them from going into default and to help them ensure completion of their degree while addressing the higher balance borrowers as well.”
The conversation was wide-ranging, with nearly all committee members expressing a form of a reserved endorsement for some of the language ED put forward, but taking issue with specific language within the proposed guidance.
Some committee members during the morning session expressed significant reservations concerning the length to forgiveness being a 20-year period, and ED limiting forgiveness to undergraduate loans.
According to Hong, ED prioritized lowering the monthly payments and chose to focus on undergraduate loans as a means to address the first entry level-degree, with the idea that other payment plans can address graduate student loan debt.
However, committee members expressed concern that the proposed language only addressed narrow issues and needed to be broader in scope.
“One of the concerns you are hearing ... is that this proposal does a lot of tinkering around the edges and is not really a broadscale reform of income-driven or income-based repayment plans,” said Daniel Barkowitz, director of financial aid at Valencia College and a NASFAA member. “I struggle with the idea that the time to forgiveness is as long as it is.”
Instead of the 20-year period, Barkowitz said he would love to see forgiveness extended to those with limited income after 10 years, not just to those enrolled in PSLF.
Other members said it was unrealistic to keep the repayment plan to 20 years because the payments would occur for nearly half of a borrower's working life with payments being required during a period of life in which other expenses like child care can already weigh on monthly budgets.
ED explained that in developing language they sought to focus on lowering monthly payments as much as possible and ensuring that borrowers would have more affordable options in repayment, which made the 20-year plan “reasonable” due to the payments being significantly lowered.
The committee members sought additional feedback from ED based on their morning discussion and looked to continue conversations on IDR since some members felt the topic was neglected in previous sessions and continued with discussions into the afternoon session.
Following the lunch break, the committee continued to discuss at length the department’s IDR proposal.
While a consensus vote on the new IDR plan was initially slated to take place after lunch, a few negotiators raised concerns that taking such a vote, even if it did not yield consensus, would mean the committee would move on from IDR and onto another topic.
At that point, the committee opted against taking a consensus vote and instead moved to go through the department’s proposed language line-by-line.
Hong noted that ED had already considered proposals from negotiators and said they are reflected in ED’s final IDR proposal, but agreed to go through the proposal line-by-line with negotiators.
Significant hangups from negotiators regarding ED’s proposal focused on the federal poverty guidelines used to establish discretionary income for purposes of determining the monthly payment, with some negotiators suggesting ED include a regional cost of living adjustment to the poverty guideline to account for differences across the country.
Bethany Lilly, a negotiator for individuals with disabilities or groups representing them, asked ED to consider raising the the income protection thresholds on the new plan from 200% of the federal poverty guideline to 300% before payments start at 5% of a borrower’s discretionary income, and then 400% when it moves to 10% of a borrower’s discretionary income.
There was also concern among almost all the negotiators with ED’s proposal to limit the new IDR plan to only undergraduate borrowers.
“All of us are really struggling with this limitation,” Barkowitz said. “I would really encourage the department to not just think of [graduate] loans, but also PLUS borrowers, both Grad PLUS and Parent PLUS.
Following a significant period of time dedicated to reviewing the IDR proposal, negotiators moved on without a consensus vote to give ED additional time to review a proposal submitted by negotiators.
The committee then began discussing the PSLF issue paper, with Hong outlining the definitions in the department’s proposal for what is considered a qualifying employer and work under the PSLF program. One major significant change that was welcomed by the committee is that some forbearances and deferments will now count as monthly payments toward a borrower’s progress of achieving forgiveness.
ED also addressed the practice of “forbearance steering” raised by negotiators in earlier sessions, whereby servicers guide borrowers toward a forbearance instead of IDR, taking those months out of consideration for PSLF. ED added a provision that if a borrower makes monthly payments during a forbearance equal to or greater than their payment would have been under an IDR plan, or would have had a $0 payment, those payments would count toward PSLF.
Additionally, payments made on Direct Loans that are subsequently consolidated will count toward forgiveness. Currently, the PSLF payment count resets upon consolidation. The department’s proposal comes as ED has also issued a temporary waiver amid the coronavirus pandemic to expand the PSLF program through October 2022 to allow eligible borrowers to count payments that previously did not count toward forgiveness, plus additional expansions resulting in a more favorable PSLF program for borrowers. The temporary waiver applies to Federal Family Education Loan (FFEL) loans that are consolidated into Direct Loans as well, but ED clarified that it does not have the authority to change the regulations to allow the payments made prior to consolidating a FFEL loan into the DL program to count toward PSLF.
As for the department’s PSLF proposal, Heather Jarvis, a non-voting advisor representing qualifying employers on the topic of PSLF, praised ED’s work on this issue.
“[ED has] removed some of the unnecessary application requirements in a way that is significant and important,” she said.
Jarvis did express disappointment, however, at ED’s narrower definition of qualifying employer, which now explicitly excludes businesses organized for profit.
Persis Yu, weighed in as well, noting that lower-income borrowers and other vulnerable populations working in public service are more likely to lack the luxury of choosing a nonprofit employer. Because of that, she stressed that the new IDR plan should be made more expansive to capture these borrowers who would have otherwise qualified for PSLF.
Another negotiator, Marjorie Dorime-Williams, representing four-year public institutions, also had concerns about the limits of qualifying employers in ED’s proposal, noting that under the proposed PSLF rules public health professionals from Texas and California might be excluded from being eligible for PSLF due to how their employment is categorized in state statute. Dorime-Williams asked for specific language referencing those states to be included in the proposal.
Hong said ED hopes a statutory remedy will address that issue in the future. The committee will reconvene Wednesday morning and pick up with PSLF before hearing from the Prison Education Programs subcommittee so the group can present their work and recommendations to the full committee.
Publication Date: 12/8/2021
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