Education Department’s Income-Driven Repayment Plan Draws Criticism

• ED set out to create a more comprehensive student loan payment plan.
• Higher education advocates say the new plan isn't inclusive enough.
• Advocates opposed the proposed IDR plan during a negotiated rulemaking session.

A new income-based student loan repayment plan has hit stiff headwinds from higher education advocates who say it won't sufficiently support borrowers buried in debt.

During a negotiated rulemaking session this week, the Department of Education (ED) laid out regulations for a fifth income-driven repayment (IDR) plan. Officials had previously stated that their goal was to streamline the program for borrowers, but higher education stakeholders taking part in the rulemaking process overwhelmingly believe the department could have done more to aid low-income borrowers. Twelve of the 15 negotiators, not including ED, voted against consensus for the new IDR plan on Thursday, Dec. 10.

That plan, called the Expanded Income-Contingent Repayment (EICR) Plan, would lower payments for borrowers at a marginal rate based on their monthly income compared to the federal poverty level. People making less than 200% of the federal poverty level would have $0 monthly payments, according to the proposal. They would pay 5% of the portion of their income monthly that falls between 200% and 300% of the poverty line, divided by 12. Lastly, monthly payments would be 10% for all income above 300% of the line.

During the rulemaking session, Jennifer Hong, Director of Policy Coordination and Lead Negotiator for ED, said the department prioritized reducing monthly payments.

ED's new regulations also allow defaulted borrowers to qualify for IDR, count $0 monthly payments toward the time for forgiveness, and add an automatic enrollment system for people that qualify for IDR who default on their student loans. The regulations also give borrowers the chance to backtrack and make payments that they previously skipped through approved deferment or forbearance, allowing them to reach the forgiveness time more quickly.

However, negotiators were left wanting more.

"On this topic, we expected the department to swing for the fences," negotiator David Tandberg, representing state regulators of higher education institutions, said during negotiations. "But instead, you went for a single."

Here were some of the larger issues negotiators had with the plan:

Debt for Graduate Degrees Is Excluded

The EICR only applies to loans students take out for undergraduate study.

This was a major sticking point for many of the negotiators. They said this makes the program exclusive when ED should be making IDR more inclusive. Negotiators argued that this stipulation also punishes former students for pursuing further education.

Marjorie Dorimé-Williams, the representative for public four-year institutions, said this exclusion will have a greater impact on students of color, who historically have had to take on more loans to pay for graduate studies. Additionally, Black Americans typically need more degrees and further education in order to earn the salaries of their white counterparts, she said.

The National Student Clearinghouse reports that between 2000 to 2016, the cumulative debt for all graduate students grew 68% overall to an average of $71,000 per borrower. Black borrowers' graduate debt grew 112% during the same period to an average of $94,000 per student.

"It's really not clear to me why we can't simply remove that language, because it doesn't mean we're still not attending to the needs of undergraduates [if we also include graduates]," Dorimé-Williams said.

ED representatives did not directly address why the department decided to exclude graduate loans.

Too Many Low-Income Borrowers Excluded

Some negotiators felt that 200% of the federal poverty level was too low of a percentage for $0 payments to end there.

Persis Yu, representing legal assistance organizations that represent borrowers, and Bethany Lilly, representing students with disabilities, agreed that the cutoff should occur at 300% instead. Yu said this would better meet the self-sufficiency standard seen across the country. She shared a report with BestColleges from the National Consumer Law Center that shows the average family of four would need to make over 300% of the poverty standard in order to be deemed self-sufficient by the Colorado Center of Law and Policy.

"I don't think there is good evidence for 200%, but I think there is great evidence for 300%," Yu said.

Hong of ED said the department stands by its marginal rate of increased payments starting at 200% of the poverty line.

Student Debt Forgiveness Timeline Is Too Long

Under the current EICR proposal, which ED can still change from now until it publishes its final regulations early in 2022, a borrower paying back their loans on this plan is eligible for loan forgiveness if they make their payments for 20 years.

Many negotiators took issue with this timeline.

"I struggle with the idea that the time for forgiveness is as long as it is," said Daniel Barkowitz, representing financial aid administrators. "Carrying that burden for 20 years ... is more than life altering; it's trajectory altering."

Many committee members, Barkowitz included, recommended shortening the time to forgiveness to 10 years, which would mirror the public service loan forgiveness (PSLF) program. However, while Hong of ED said the department considered that proposal after previous negotiating sessions, ED did not feel comfortable shortening the timeframe this much.

Michaela Martin, representing independent students, said this would adversely affect low-income borrowers. She said by forcing borrowers to carry this debt for two decades, many will miss out on other loan opportunities, hurting their chances for class mobility.

Lilly, representing students with disabilities, urged ED to meet negotiations at 15 years instead, but ED did not change this language prior to the consensus vote.