- The Education Department is delaying the release of a new income-driven repayment plan for student loans.
- A spokesperson told Insider the proposal will be in a separate package and unveiled at a later date.
- Advocates are concerned this is pushing back needed reforms to plans for low-income borrowers.
President Joe Biden’s Education Department is in the process of finalizing rules that will bring relief to millions of student-loan borrowers, but a proposal release to lower monthly bills is being pushed back.
Income-driven repayment (IDR) plans were created to give borrowers affordable monthly payments based on the income they bring home, with the promise of forgiveness after 20 or 25 years, depending on which plan they are on. But the plans have come under scrutiny over the past years due to complicated paperwork requirements that shut out many borrowers eligible for the plans. A recent NPR investigation revealed that some loan companies had failed to track borrowers’ payments, pushing them off the loan track and creating significant administrative burdens.
As a result, the Education Department committed to creating a new repayment plan that would work better for borrowers as part of the rulemaking process, and it was slated to unveil that plan this month. However, a department spokesperson told Insider on Thursday that the release of that new plan is being delayed and will not be included in the upcoming packages that will be finalized by November 1.
This will ensure measures like expanding Pell grant access to incarcerated students will be finalized, the spokesperson said. The IDR proposal will be introduced in a separate package that the department believes can still be implemented in July 2023, alongside the other proposals.
Despite the department’s belief that this delay will not push back final implementation, advocates express concerns with this announcement. Persis Yu, policy director and managing counsel at the Student Borrower Protection Center, said in a statement that “distressed federal student loan borrowers are left waiting for President Biden to make good on his promise of delivering relief.”
“Failing to deliver a finalized IDR rule by November 1st means that borrowers will either need to wait another year for the promise of a truly affordable repayment option or imperil their wellbeing as the Department and its financial services — with their history of incompetence and abuse — rush to implement yet another repayment plan,” Yu said.
In April, the Government Accountability Office revealed that 7,700 borrowers were “potentially eligible” for the loan forgiveness but were continuing to make payments due to tracking errors. As a result, in April, the department announced an adjustment to IDR plans that included a one-time revision of any past payments that may have been disqualified toward forgiveness progress, estimated to bring 3.6 million borrowers closer to relief.
While it’s unclear what already exactly the upcoming proposal to reform IDR will entail, the announced adjustments are currently being implemented and borrowers may not see the effects until fall of this year. The department also noted on its website that permanent fixes include “proposals to allow more loan statuses to count toward IDR forgiveness, including certain types of deferments and forbearances.”
With student-loan payments set to resume in just over a month, though, advocates want to ensure the temporary IDR adjustments are fully implemented before borrowers are once again hit with monthly bills. On Thursday, 134 organizations wrote to Education Secretary Miguel Cardona urging him to extend the payment pause until after the IDR adjustment is fully processed “to reduce confusion and ensure that borrowers whose loans will be canceled do not needlessly resume repayment.”
For now, details on when the new IDR plan will be unveiled, and what it will encompass, remain to be seen.
“Another thing that is coming out soon is a new repayment plan, and we’re looking at reducing monthly payments for people with low incomes,” Under Secretary of Education James Kvaal said in an interview this week. “And we think this new plan will make student loans much much more affordable, and we’ll be announcing the details of that in the coming weeks.”