July 21, 2022
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.
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