NAICU Washington Update

Negotiations Continue on Loan Provisions

The negotiated rule-making team charged with crafting regulations for recent changes to loan provisions has scheduled a fourth session for April. The additional session was necessitated by the group’s inability to reach consensus on certain payments to lenders as calculated under the new income-based repayment plan.  

The negotiators have been hammering out language on the loan provisions that were part of the budget reconciliation bill passed late last year.  Items requiring action include the new public service loan forgiveness program, coordinating new and existing benefits to those in the military, the definition of a not-for-profit holder, and an income-based repayment plan.

A key sticking point has been how to deal with a lender payment calculation in the new income-based repayment option.  The option is intended to give borrowers with a debt-to-income ratio above a predetermined level another alternative to existing repayment plans.  The current options are standard 10-year, graduated, extended, income-sensitive, and income-contingent repayment.  

While lowering monthly payments is attractive – especially for low-income, high-debt borrowers – it could make loans more costly in the long run, the loan servicers on the rule-making team argue, because of unreduced principal, since payments are first applied to interest, and the accumulated interest is not covered by the payment amount.  They also assert that few borrowers will reach the 25-year point for loan forgiveness unless they opt for public service jobs, through which the loan may be forgiven after 10 years.

A second TEACH grant negotiated rule-making team has been dealing with the new grant program designed to attract and keep teachers in the science, mathematics, foreign language, and special education fields.  That group wrapped up its work in February, and the draft regulations will be published for comment in the coming weeks.

The proposed TEACH program rule should be carefully reviewed by those on campus. The grants – $4,000 grants per year for four years – will be available to students studying science, math, and foreign languages, and intending to teach in those fields.  However, the grants would convert to loans if a student changes majors, doesn’t graduate, or graduates but is unable to complete the four-year teaching service requirement on time.

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