Dive Brief:
- The U.S. Department of Education has pushed back the release of its regulatory proposal that will govern a category of student loans known as income-driven repayment plans, in which borrowers pay back their debt based on how much they earn.
- Ed Department officials intended to issue the draft rule on IDR alongside three other proposed regulations this month, such as one that will establish policies for providing federal Pell Grants to incarcerated students.
- But the Ed Department opted to separate out the IDR draft regulation, with the intent that the other three proposals could be finalized by a regulatory deadline of Nov. 1, which would allow them to take effect in July 2023. It’s unclear now when the department will put forth the IDR draft regulation.
Dive Insight:
Part of the Biden administration’s education regulatory overhaul involves a revamp of the IDR program, which has been plagued with administrative problems for years.
Income-driven plans allow borrowers to pay back their loans over a longer period than what is typical, usually 20 years or 25 years, after which they may be eligible to have their remaining balance erased.
However, the department has said loan servicers have pushed many borrowers into forbearance — which temporarily allows for no or small monthly payments — rather than helping them with income-driven plans for which they may qualify.
As a result, they missed out on making payments which would have allowed them to achieve loan forgiveness sooner, the department said.
A U.S. Government Accountability Office report released in April found the department had only approved 157 loans for forgiveness under IDR as of June 1, 2021. Another 7,700 loans worth about $49 million in outstanding debt might have qualified for cancellation, the GAO concluded
The Ed Department also failed to communicate the complexities of IDR to borrowers, the GAO said.
The Ed Department attempted to patch up the program in April, allowing all borrowers’ past payments on Direct Student Loans and Federal Family Education Loan Program loans to qualify toward having loan debt forgiven under IDR.
A new IDR regulation would also try to improve upon these plans, the Ed Department has said.
The Office of Information and Regulatory Affairs this week finished reviewing the remainder of proposed rules in the regulatory package, a required step before they’re published and the public can submit feedback.
The other draft regulations include efforts to address processes for colleges that change owners. Also covered by the drafts is the 90/10 rule, which prohibits for-profit institutions from receiving more than 90% of their revenue from federal student aid.
