By Maria Carrasco, NASFAA Staff Reporter
This article has been updated to note that under the SIMPLE Act, if a borrower has a PLUS loan, the notification from ED would also outline how the borrower could qualify for an IDR plan if they consolidate their loan.
In a renewed effort, members of Congress are once again pushing for legislation that would allow the Department of Education (ED) to notify and automatically enroll borrowers into income-driven repayment (IDR) plans.
The bill, dubbed the Streamlining Income-driven, Manageable Payments on Loans for Education (SIMPLE) Act, was re-introduced by Rep. Suzanne Bonamici (D-Ore.) and makes several amendments to the Higher Education Act (HEA).
Under the bill, ED would notify borrowers – who are at least 31 days delinquent on a federal student loan – with a brief description of the repayment plans the borrower is eligible for, and provide instructions on how to select a repayment plan. Additionally, ED would notify the borrower about how much their monthly payment would be under each IDR plan.
If the borrower has a PLUS loan, the notification from ED would also outline how the borrower could qualify for an IDR plan if the borrower consolidates their loan, along with the amount of the monthly payment under an IDR plan.
The notification would also let the borrower know that if they become delinquent for 75 days on a federal student loan, and have not selected a new repayment plan, or are not already enrolled in IDR plan, then ED would automatically enroll the borrower in an IDR plan that has “the most favorable terms” for the borrower with the lowest monthly payment for each federal student loan.
The SIMPLE Act would also allow ED access to existing taxpayer information via the IRS, making it possible to automatically enroll borrowers in an IDR plan, which would remove the enrollment process barrier for a borrower.
In a press release, Bonamici noted that IDR plans have helped borrowers avoid default and delinquency because it provides plans that better match their financial ability. However, Bonamici noted, there are current administrative hurdles, which discourage some borrowers from ever enrolling into an IDR plan.
“Education is a good investment, but too many borrowers experience long-term financial hardship because of an overly complicated student loan system that limits access to the best repayment plan available to them,” Bonamici said in a statement. “The SIMPLE Act helps borrowers access affordable repayment plans that reduce their risk of experiencing the devastating consequences of default.”
If enacted, the automatic enrollment provision would take effect on July 1, 2026, and would apply to award year 2026–2027 and each subsequent award year.
NASFAA has endorsed the SIMPLE Act.
Karen McCarthy, NASFAA’s vice president of public policy and federal relations, said that many borrowers may struggle to pay off their loans due to “needless complexity” within the federal student aid system.
“Many are simply unaware of generous income-driven repayment plans that can lower their monthly payments,” McCarthy said. “The SIMPLE Act would expand access to affordable income-driven repayment options by automatically enrolling struggling borrowers in those plans before they experience the punitive consequences of default. The financial aid community stands in support of this bill.”
Stay tuned to Today’s News for more updates on the SIMPLE Act.
Publication Date: 8/14/2024
Miriam E | 8/14/2024 1:23:38 PM
Good idea!
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