NAICU Washington Update

Student Loan Negotiated Rule-making: The Progress to Date

January 24, 2012

The first of three Department of Education sessions to develop student loan regulations was largely devoted to technical issues.  Additional sessions are scheduled for February and March.

The initial set of meetings the week of January 9 established the protocols for discussion, with participants reviewing the 20-plus issues proposed for regulation - many of which are to establish consistency among the Direct, FFEL, and Perkins loan programs. The Department accepted several of the issues negotiators asked to be considered. The Department, however, also has proposed regulatory changes to the income-contingent repayment (ICR) and the income-based repayment (IBR) plans.

The Department intends to use the ICR's regulatory flexibility to help struggling borrowers pay their student loans -- a concept proposed by President Obama last fall. The income-contingent repayment statute requires only that repayment must vary with income and must provide additional repayment time, with much of the plan's structure left to the Secretary.

The Department's goal is to change the ICR regulations so that they provide borrower benefits similar to those of the recently upgraded IBR repayment plan, given that the IBR benefits aren't available until July 1, 2014 - and even then, just for new borrowers. Changing the IBR effective date could only be made through legislation.

Because of the cost, the Department would limit the ICR changes to a subset of borrowers. As part of the President's "Pay As You Earn" initiative, annual payments would be capped for new borrowers in 2008 who receive a loan in 2012. These borrowers could repay their loans at 10 percent of discretionary income, and could reduce their maximum repayment period to 20 years. Any loan at the end of that period would be canceled.

The proposed IBR changes relate to notifying borrowers of the annual requirement to update their income information, and to the repayment options for borrowers who leave IBR for another repayment plan.