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Advocates Call on ED to Revise IDR Before Student Loan Moratorium Ends

By Hugh T. Ferguson, NASFAA Staff Reporter 

In a new white paper, a number of consumer protection groups outline the importance of the Department of Education (ED) using the current federal student loan moratorium to make improvements to income-driven repayment before the benefit expires.

The paper — published by the Student Borrower Protection Center, the Center for Responsible Lending, and the National Consumer Law Center — calls on ED to use the same reasoning it applied to the recent Public Service Loan Forgiveness (PSLF) waiver to implement targeted relief to the IDR program.

“An IDR waiver would offer a path forward for policymakers who are committed to delivering on the promise of IDR to ensure that borrowers can access affordable loan payments in the short term and to provide a way out for borrowers experiencing long-term financial hardship,” the paper explains.

According to the groups, some of the most glaring issues facing IDR started coming to light in 2016 when the first group of borrowers became eligible for loan forgiveness after being in income-driven repayment for 20 years. The paper cites recent data from ED revealing that of the 4.4 million IDR borrowers that have been in repayment for 20 years, only 32 have ever successfully obtained loan cancellation.

Their white paper provides three areas where ED could best utilize a waiver to improve IDR outcomes:

  1. On a retroactive basis, count all months since the borrower entered repayment following their grace period as qualifying months toward forgiveness;

  2. Provide automated relief; and

  3. Apply the IDR waiver to all federal loan borrowers, regardless of loan program.

ED recently completed a negotiated rulemaking session where the committee ultimately did not reach consensus on its IDR issue paper. The groups urge ED to use the rulemaking process and finalize language that was considered by the committee in a way that would help alleviate financial strain the program has imposed on borrowers.

“ED has an opportunity to produce a new and improved IDR plan through the ongoing rulemaking process,” the groups wrote. “It should embrace the opportunity and use it to put forth a generous and simple plan that will provide borrowers with truly affordable payments that will result in forgiveness after years of repayment.”

 

Publication Date: 1/19/2022


Jeff T | 1/28/2022 1:10:38 PM

Hopefully, the Student Borrower Protection Center didn't forget that debt forgiven via IDR is taxable, and for some, forgiveness will simply mean the transfer of debt from ED to the IRS, not exactly the jubilee the neediest borrowers are hoping for. Clearly the entirety of the debt needs to be cancelled via executive order as this wouldn't cost the taxpayers anything and the Higher Ed Act already grants the President/Sec. of Ed this legislative power. Going forward, implement a Pell grant for all, guaranteeing that tuition and fees at all public postsecondary institutions will be paid in full by the federal government, and the states can fund housing, meals, textbooks and other ancillary costs. If student loans are to continue to exist, the government loans should offer zero interest loans to everyone attending a participating institution. The Pell should keep up with rising costs, and public universities wishing to offer federal funding should be prohibited from raising tuition above the rate of inflation.

Shawn O | 1/20/2022 12:13:13 PM

IDR needs to be applied to all federal student loan borrowers. For those with low-income it provides an affordable payment and allows them to protect their credit rating due to fewer delinquencies and defaults. For those with high-income it also provides an affordable payment, while automatically helping to reduce the amount of interest paid over the life of the loans. And for those who start out low-income and move later to higher-income, it helps to transition from a low payment to a still affordable payment under their increasing income level. Not making this change continues to financially punish those who can afford it least.

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