Education Department Delays Release of New Student Loan Payment Plan

• The Department of Education discussed a new income-driven repayment (IDR) plan during rulemaking sessions in December.
• Those discussions did not reach consensus among negotiators, so the department is free to release its own version of the plan.
• Advocates hoped the new plan would be revealed before student loan payments resumed.

The Department of Education (ED) will not release its plans for a new income-driven repayment (IDR) plan for low-income borrowers this summer as originally planned.

The department had stated earlier this month that it intended to reveal its proposal for a new IDR plan for public comment this summer. However, this delay puts the timeline of when borrowers can access that plan into question.

Advocates say any substantial delay of this plan — pitched by the department to be the most concise IDR plan to date — could cause thousands of borrowers to miss out on promised benefits.

Currently, four IDR plans create monthly payment plans for those with federal student loans based on income. Borrowers are eligible to have debt erased after 20-25 years of repayment.

Michaela Martin, a negotiator representing students during the rulemaking process for this plan late last year, told BestColleges that IDR was the most important of 12 issue papers discussed during rulemaking. Therefore, it's concerning ED would delay public comment on this issue.

"That's potentially another year of people struggling to make student loan payments and get out of debt," she said.

Still, a report from Politico suggests that despite the delay and subsequent missing of a Nov. 1 window for the end of public comment, ED still intends to put the IDR plan in motion by July 1 of next year.

An ED spokesperson told BestColleges that the IDR provisions can be "early implemented," meaning the rule does not need to meet the same Nov. 1 timeframe as some of the other accountability regulations released this summer.

Persis Yu, policy director and managing counsel at the Student Borrower Protection Center and another negotiator, said in a statement that any delay might hurt the financial well-being of those who the IDR is meant to benefit.

"Once again, distressed federal student loan borrowers are left waiting for President Biden to make good on his promise of delivering relief," Yu said.

What's Going on Behind the Scenes?

IDR became one of the more contentious issues discussed during negotiated rulemaking late last year. Martin said she and her fellow negotiators felt ED was unwilling to consider their suggestions to make IDR more accessible and helpful for low-income borrowers.

Since then, she said there has been little conversation between the department and negotiators after all sides failed to reach consensus on the issue.

Therefore, it's difficult for her to pinpoint why ED delayed releasing the final draft of the proposal, she said.

“Advocates say any substantial delay of this plan — pitched by the Education Department to be the most concise IDR plan to date — could cause thousands of borrowers to miss out on promised benefits.”

One potential reason is that it may take some interagency communication to implement some of the changes negotiators proposed in December. For example, one hang-up centered on a lack of income data sharing between ED and the Internal Revenue Service. The bureaucracy of creating such an agreement may take longer than seven months, hence the delay, Martin said.

That's an optimistic view of the situation, she clarified, but she worries the real reason for the delay could be less beneficial for borrowers.

"It makes me very concerned because it was a very contentious topic because the department did not go as far as we wanted. Not even close," Martin said. "My concern is that they are still planning on doing nothing."

Another possible explanation is that the department simply has too much on its plate to get all these regulatory promises out on time. ED also delayed the release of proposed language for a new gainful employment rule. And a negotiator from that rulemaking process previously told BestColleges that she believes the delay was a case of the department biting off more than it could chew.

ED negotiated 19 issue papers between October and March.

What's in the Proposal?

ED put forth a vision for a new IDR plan in December that many negotiators said was a step up from existing plans, but they added that it wouldn't do enough to address the systemic problems with the program.

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, and monthly payments would be 10% for all income above 300% of the line.

Many negotiators approved of the tiered system to calculate payments, but holes remained.

One point of contention was the exclusion of graduate student debt, which some said would disproportionately impact students of color.

Additionally, many negotiators wanted to see the timeline to forgiveness — 20 years in the December proposal — shortened significantly and the poverty line percentage adjusted so those making less than 300% of the line could have $0 monthly payments.

The ED representative seemed unwilling to budge on many of these issues and repeatedly said it stood by its proposal.