Pay As You Earn Repayment Options NegReg

February 25, 2015

AACS

Tom Netting

Pay As You Earn Repayment Options NegReg

Welcome Statement from Department

Introductions

Housekeeping Items

Overview of Rulemaking Process

Review and adopt Protocols

-          See handout

-          List of committee:  list of negotiators approved as provided absent contact information

-          Subcommittee formation can be requested by either the Department or any non-federal member to address specified issues. 

-          Protocols Adopted

Petitions for Membership   

-          none. 

Overview of the issues

-          Two issues

  • Issue to establish FFEL procedures for FFEL Program Loan holders to use the DoD Manpower Data Center database to identify US Military servicemembers who may be eligible for a lower interest rate on their FFEL loans under the Servicemembers Civil Relief Act. 
  • Extension of Pay as you earn plan to all borrowers regardless of when they borrowed to have a cap at 10% of income. 

Inclusion of New Issues Proposed by Committee Members

-          Nancy Masten from Great Lakes Higher Education Guaranty Corp:  Defaulted borrowers can be impacted by extra steps however small they can be, so let’s remove those obstacles and let them get back into normal repayment.

  • Standard repayment plan may not be the best plan – borrower has a choice of plan, and if they don’t choose one, then they get standard plan.  They only get one chance after default. 
  • Trying to avoid default again.  Make transition from rehabilitation to repayment smoother and easier. 

-          Toby Merrill representing Legal Assistance Organizations.  Statutory change has limited rehabilitation fees from 18.5% to 16%.  (PL 113-67)

  • Clerical change to regs to make them consistent with statute. 
  • Statute has eliminated requirement that defaulted loans be sold following rehabilitation.  This also needs to go into the Regs. 

-          Pat Hurley from Minority Serving Institutions Cohort Default Rate:

  • More leeway in appeals process for low participation rate.  Right now they can’t appeal until the third year
  • Many schools not participating in loan program because of this.

-          Melvina Johnson from private, for profit schools – burden of reapplying for Pay as you earn and resubmitting financial

  • More automated process such as IRS match
  • This is partly on the schedule to be discussed per the Dept.

-          Shannon Sheaff from two year public institutions two issues

  • Loan Rehabilitation Process:  in the default process, a number of the defaulters have a lower loan amount and could pay loan in full, but those borrowers aren’t given the same benefits of the 9 of 10 month.  So a borrower who pays in full should be given same benefits as someone who goes through rehabilitation. 
    • Smaller Borrowers who are just paying off their default are not getting a benefit that larger borrowers are getting. 
  • Second issue CDR in identifying deceased borrowers.  When you can only prove 2-3 of 10 deceased borrowers, you have to get verification from family.  This is difficult and sensitive. 

-          Suzanne Martindale from consumer advocacy organizations: payments made prior to consolidation should be given credit “for time served.”  Credits applied to borrowers.

-          Sam Levine state attorneys generals:  For service members who get lump sum payments, those lump sums are not credited in such a way that would benefit the students.  Those should be credited for public service loan forgiveness

-          Will Shaffner FFEL program lenders:  Annual communication of anniversary date of IDR. 

-          Rachel Feldman from four year publics:  ability of borrowers to enroll into income based plan directly out of exit counseling. 

  • Streamline application/renewal application process. 

-          Darin Freundal FFEL program lenders:  Military deferment?

-          Helen Faith from two year public institutions: Provide CDR adjustment for those with split servicing; those borrowers need to be considered. 

REVIEW OF ISSUES

Issue 1: Identifying servicemembers who could be eligible for lower interest rates

            - no contentions.  Note: veteran group representatives were absent today. 

Issue 2: Pay as You Earn:

-          Committee charged to expand the plan to more borrowers who are not eligible to take advantage of the 10% income cap and help struggling borrowers

-          Robert: Mills representing the for-profit sector:  Under G/E, will pay affect graduates who also may have economic factors?  (I don’t know, and those staffers

  • Loans must be paid with no economic factors.  But under PAYE, economic factors are considered, but under GE, economic factors are not considered. 

PUBLIC COMMENT PERIOD

A member of the public asked the committee to consider the discharge of federal student loan debt for students of Corinthian Colleges. 

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