NAICU Washington Update

Loan Neg-Reg Completes Spring Cleaning

April 09, 2012

The Department of Education's negotiated rule-making panel on student loans completed its work in late March, and agreed upon a final set of draft regulations. There were two main focuses to the negotiations, with a total of 25 issues in all being addressed.

The more important focus was to enhance consumer protections in the income-based repayment (IBR) plan, and to make changes to the current and more flexible income-contingent (ICR) repayment plan.  The changes to the ICR plan would enable borrowers to receive benefits that will not be available under the IBR plan until July 2014.  (See November 7 and January 25 Washington Update stories)

The new ICR regulations would reduce the borrower's monthly loan payments from 15 percent to 10 percent of the difference between the borrower's adjusted gross income and 150 percent of the annual poverty guideline.  In addition, the repayment period for loan forgiveness of the remaining debt would be lessened from 25 to 20 years.  The Department plans to publish the proposed rules on IBR and ICR changes by November 1, with their becoming effective July 1, 2013.  This would make the more generous ICR benefits available a year earlier than they will be under IBR.  The changes to ICR were part of President Obama's 2011 Pay as You Earn proposal.

The other, and rather uncontroversial, focus of the student loan neg-reg sessions was to scrub the regulations, removing out-of-date references to the FFEL program and making provisions in the remaining FFELP, the Direct Loan program, and the Perkins Loan program as consistent as possible under existing law.  These proposed changes, running to about 400 pages, will be published separately in the Federal Register at a later date, and won't be effective until July 2014.

MORE News from NAICU