Diving overview:
- The American Council on Education led a group of 30 higher education organizations last week praise regulatory proposals overhaul income-based repayment plans, but urge the Biden administration to work with Congress to overhaul the entire student loan system.
- US Department of Education draft regulations debuted in January, it would see major changes to income-driven repayment plans, which allow borrowers to have their loans forgiven after making a certain number of qualifying payments based on their income. The proposals — which are expected to greatly increase the number of people eligible for the programs and lower their monthly payments — drew more than 13,000 public comments.
- The proposal includes elements that are “important and long overdue,” ACE President Ted Mitchell wrote in a public comment on behalf of 30 organizations. But a more effective way to deal with the pervasive problems with federal student loans would be a “comprehensive effort to review our entire loan and repayment system,” Mitchell wrote.
Diving Statistics:
Among the groups signing Mitchell’s comments are major organizations representing various corners of higher education, such as the Association of Public and State Grant Universities, Career Colleges and Universities, the Council of Independent Colleges and the Association of State Higher Education Executive Officers.
They are calling on the Biden administration to implement a long-overdue overhaul of the Higher Education Act, the federal law governing federal financial aid programs. It has not been updated since 2008, and higher education experts have expressed doubts about it a divided Congress can come together and make comprehensive changes to the law.
“In the absence of legislative action, we understand that the Department believes it must use its regulatory powers to help student borrowers repay their loans and fix the burdensome and unnecessarily complicated repayment system,” Mitchell wrote in a comment.
The Department of Education has proposed major changes to the income-driven repayment system, including reducing payments from 10% to 5% of borrowers’ discretionary income. It would also raise the income threshold for borrowers who don’t have to make monthly payments from about $20,400 for individuals to $30,600.
Additionally, the amount of time borrowers must repay would be reduced from 20 years to just 10 years if they owed $12,000 or less. For every additional $1,000 they borrow, an additional year will be granted.
Prominent Republican lawmakers pushed back against the proposals. Sen. Bill Cassidy of Louisiana and Rep. Virginia Foxx of North Carolina led a group of more than five dozen lawmakers who called on the Biden administration to scrap the proposed changes because of their estimated costs.
In late January, the Penn Wharton Budget Model predicted the plan would come to fruition costs up to 361 billion dollars over the next decade.
In a letter to Education Minister Miguel Cardona, conservative lawmakers argued the proposed regulation “would turn the low-income federal student loan safety net into an unsustainable transfer of wealth from hard-working taxpayers to college-educated individuals.”
However, higher education groups have expressed support for some of the Biden administration’s proposals, such as shortening the repayment period and raising the income cap for defaulting borrowers. They also praised provisions that would automatically enroll borrowers in income-driven repayment plans and eliminate their unpaid interest each month.
But they asked for a comprehensive revision of the law on universities.
“This would be the most effective way to address the problems with loan repayment policies in a holistic way,” Mitchell wrote. “We urge the Department to work with Congress to do this.”
The letter also said the groups hope Congress will incorporate some of the proposed changes to income-driven repayment plans into federal law.
“We will continue to support ways to ease student repayment burdens and hope to see a solution that allows for greater consistency across repayment plans for all borrowers,” Mitchell wrote.
