Biden Administration’s Sweeping IDR Changes Will Provide Much-Needed Relief for Many, but Still Leave Behind Graduate and Parent PLUS Borrowers
Today, the U.S. Department of Education released the long-awaited details on its proposal for major changes to Income-Driven Repayment (IDR) regulations. These changes were announced in August alongside President Biden’s historic debt relief program.
Included is a historic plan to make federal student loan payments more affordable by lifting the threshold for IDR qualifying discretionary income from 150 percent to 225 percent of the federal poverty level guidelines and a reduced cap on monthly repayment amounts from 10 percent to 5 percent of discretionary income. Many low-balance borrowers will also see cancellation many years sooner. However, the reduced payment amount will only be available to borrowers with undergraduate loans and will not provide any benefits to Parent PLUS borrowers.SBPC Deputy Executive Director, Persis Yu, served as the lead negotiator for Legal Assistance Organizations that Represent Students and/or Borrowers for the 2021 Negotiated Rulemaking Affordability and Student Loans Committee which was tasked with developing the initial draft of the Income-Driven Repayment regulations.
In response to the new regulatory proposal, SBPC Deputy Executive Director Persis Yu released the following statement:
The U.S. Department of Education’s Income-Driven Repayment (IDR) proposal signals a remarkable shift in the way the government supports struggling student loan borrowers. For nearly three decades, IDR has failed to live up to its promise of an affordable lifeline for federal student loan borrowers. Instead, the program perpetuated an inescapable debt trap–leaving millions of borrowers vulnerable to devastating collection tools. By cancelling any unpaid interest each month, reducing monthly payments, and providing access to defaulted borrowers, the Biden Administration has begun to deliver on the original promise of IDR.
“However, the Department’s plan remains out of reach for many of the students and families who are forced to take on some of the greatest amounts of debt in hopes of achieving social mobility. It ignores the reality that low-income families—especially low-income families of color—are more likely to rely on ParentPLUS loans or need to get a graduate degree to earn the same salary as their wealthier white peers. Equity demands that these borrowers have equal access to an affordable payment plan and the necessary supports to free themselves from the crushing weight of student debt. The Secretary must include them in the final rule.
Background
These long overdue changes come after years of work from advocacy organizations pushing the Administration to address IDR’s system-wide failures. The proposed rule addresses some of the key findings and mirrors several of the recommendations put forth in SBPC’s Improving & Delivering Relief IDR paper series as well as the executive actions outlined in SBPC and Demos’ Delivering on Debt Relief series, including the ways that runaway interest creates a debt trap for borrowers with negative consequences that ripple across borrowers’ financial lives. In August, 2022, alongside his announcement of up to $20,000 of student debt relief for federal student loan borrowers, President Biden promised to create a new Income-Driven Repayment plan that capped undergraduates’ payments at 5 percent of their discretionary income. That announcement was preceded by the U.S. Department of Education’s Affordability and Student Loans negotiated rulemaking committee which met between October 4, 2021, and December 10, 2021, to consider proposed regulations for the federal student financial aid programs including income driven repayment. That Committee did not reach consensus on IDR.
Further Reading
SBPC and NCLC Blog Highlighting New Revelations of Mismanagement and Abuse Compromising the Student Loan Safety Net: Explosive New Evidence of Mismanagement of Student Loan Program Shows Need for IDR Waiver
SBPC Blog on How Navient’s Settlement with 39 State Attorneys General Shows System-Wide Breakdowns Needing Substantive IDR Changes to Fix: Navient’s Settlement Shows Why the Biden Administration Must Take Bold Action to Fix Income-Driven Repayment
SBPC, NCLC, and CRL IDR Waiver Proposal to Biden Administration to Fix Broken IDR System: The System is Broken: 100+ Organizations Urge Biden Administration to Aid Millions of Student Loan Borrowers with Overdue Income-Driven Repayment (IDR) Reforms
December 2021 SBPC Report: Revisiting Relief for Borrowers Waiting for Income-Driven Repayment
SBPC Paper Series on Improving and Delivering Relief through Income-Driven Repayment:
- Driving Into A Dead End: Why IDR Has Failed Millions With Decades-Old Debts
- Driving Inequity: Are IDR’s Documentation Requirements Hurting Borrowers of Color?
- Driving Runaway Debt: How IDR’s Current Design Buries Borrowers Under Billions of Dollars in Unaffordable Interest
- Driving Unaffordability: How Income-Driven Repayment Currently Fails to Deliver Financial Security to Student Loan Borrowers
- Driving Down Distress? The Principles & Incomplete History of Income-Driven Repayment
100+ Organizations led by SBPC, CRL, and NCLC Urging the Biden Administration to Fix IDR Failures: The System is Broken: 100+ Organizations Urge Biden Administration to Aid Millions of Student Loan Borrowers with Overdue Income-Driven Repayment (IDR) Reforms
Additional Background Materials
- Education Department’s Decades-Old Debt Trap: How the Mismanagement of Income-Driven Repayment Locked Millions in Debt
- Almost Two in Three Navient Borrowers Enrolled in IDR Plans and Making Payments During COVID-19 Federal Student Loan Payment Pause Are Underwater
- Road to Relief: Supporting Federal Student Loan Borrowers During the COVID-19 Crisis and Beyond
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About Student Borrower Protection Center
The Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice for all.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.