Great news, plus Q & A update
Great news about Income-Based Repayment (IBR) regulations
We're excited to report major progress in our continuing efforts to make IBR as useful as possible for struggling borrowers. During the "negotiated rulemaking" process for the Higher Education Opportunity Act of 2008, the Department of Education agreed to revisit two serious problems with the current rules for IBR: the treatment of married borrowers and the debt level used to calculate eligibility. While the changes aren't final, the negotiators reached consensus about fixing these problems along lines that we and our allies have proposed.
- Current rule: When two married individuals both have student loan debt and file taxes jointly, they could face up to double the monthly loan payment of two unmarried borrowers in otherwise identical situations. This is because their combined income is used to calculate each spouse's own IBR payment, ignoring the fact that their joint income must be used to pay down both borrowers' debts.
- Negotiated change: When a married borrower whose spouse also has federal student loans applies for IBR, they will still look at the joint income, but they will also factor in the spouse's debt before calculating IBR payments. We will update our calculator -- and tell you about it -- as soon as we know more details.
- Current rule: IBR eligibility and payments are based on a borrower's loan balance when s/he first entered repayment. While good for most borrowers, this works against those whose loan balances have grown since entering repayment, which can happen when interest accrues during forbearances and deferments. In some cases, a borrower's current loan balance would make them eligible for IBR, but they would be prohibited from enrolling in the program if their original loan amount didn't qualify them.
- Negotiated Change: Borrowers' IBR eligibility will be based on either their loan balance when they first entered repayment or their current loan amount, whichever is greater. This will allow borrowers whose loan amount has increased to make monthly IBR payments based on what they actually owe, not what they owed in the past.
What happens now? The Department of Education still has to issue proposed regulations reflecting these agreements, and the final rule will be issued by November 1, 2009. Therefore, these rule changes may not go into effect until as late as July 2010, even though IBR becomes available in July 2009. We will continue to keep you updated as things develop, but we wanted to share this good news with you right away.
Answering your questions
We get a lot of questions about IBR and Public Service Loan Forgiveness (PSLF), and many are asked repeatedly. We've added a Frequently Asked Questions section to IBRinfo.org for your reference, and have also started answering questions on our Facebook group, since our small staff can't always respond quickly to individual emails.
(This message was sent to the IBRinfo mailing list on May 26, 2008.)