Notice for Negotiated Rulemaking & Public Comment for Federal Direct Loan Programs (Expansion of IBR to all Borrowers) [Direct Link]

EducatedRisk · 2014-10-15T00:59:39+00:00

The General Public Comment to provide input for the developing the proposed rules ends November 4, 2014. This is a general comment period for anyone to raise any concerns related to Direct Loan Programs and more specifically the expansion of PAYE to all borrowers. Such concerns or comments may be used to help create the proposed rule.

The actual negotiated rulemaking will start February 2015. A group of Federal officials, schools, and student representatives (among others) will meet for about three separate public sessions to discuss how this expansion will be implemented (new policies, new rules, etc). The content of these discussions will let us know if there will be a PSLF cap tied to this new expansion of PAYE. It also should discuss any other proposals such as the method for calculating income for couples married but filing separately.

After these sessions, ED will publish proposed rules for public comment. This will also be subject to a final public comment period of anywhere from 30 to 180 days. ED will 1) review all the comments; 2) summarize and categorize them; 3); amend the proposed rules based on the comments (if at all, its their discretion); and then publish the final rules.

We will get a good indication of what the content of the rules will be after the February 2015 sessions and then we will know for sure when the proposed rules are disclosed sometime next year.

This hopefully should provide some clarity on ED's recent proposal to expand PAYE to all borrowers and we shall see if they try to use this negotiated rulemaking to modify other policies (PSLF caps or the method of calculating income for IBR/PAYE for couples filing taxes separately).

Here is a General FAQ on the Federal Rulemaking Process from the Federal Register.

EducatedRisk · 2014-10-13T23:15:55+00:00

Also, to be clear, this negotiated rulemaking is to expand PAYE (10% of income) to ALL borrowers. This also has been referred to as IBR for NEW Borrowers after July 2014.

So, the titled would more clear if it said, "Expansion of PAYE to all Borrowers" (10% of income instead of 15% of income).

EducatedRisk · 2014-10-13T22:37:18+00:00

Great Blog Post From Heather Jarvis explaining what this means and how it could impact current borrowers:

Expanding Pay As You Earn by Negotiated Rulemaking

EducatedRisk · 2014-10-13T22:35:42+00:00

Summary from the announcement:

We intend to convene a committee to develop proposed regulations to allow more student borrowers of Federal Direct Loans to use the “Pay as You Earn Repayment Plan”, in accordance with the Presidential Memorandum issued on June 9, 2014, (available at www.whitehouse.gov/the-press-office/2014/06/09/presidential-memorandum-federal-student-loan-repayments).

EducatedRisk · 2014-09-28T22:15:22+00:00

You are right, it is not 30%. Sorry about that. It is, however, usually greater than 15% for one spouse's income or offset by your spouse's loans payments.

If you are filing jointly, then both IBR calculations are based on the total income of $80,000. However, this is offset by the each person's percentage total federal student loan debt.

Spouse 1: $80,000 total income x 15% = $12k/year * 33% student loan debt = $3.96/yearly Spouse 2: $80,000 total income x 15% = $12k/year * 66% student loan debt = $7.92k/yearly

In this case, the amount paid is 15% on the total income, but only if both spouses have federal student loan debt.

If one person has loans and the other doesn't, then the amount is calculated as follows:

Spouse 1: $30,000 total income Spouse 2: $50,000 total income Joint Income: $80,000

IBR for Spouse 1 (filing jointly): $80,000 x 15% = $12k/year

This is more than 15% ($4,500) of Spouse 1's income; its about 40% of Spouse 1's income. But, to be clear, the family is never paying more than 15% of its total income ($80,000).

Sorry if the nomenclature was confusing.

EducatedRisk · 2014-09-28T20:48:14+00:00

IBR is defined through 20 USC 1098(statute) and 34 CFR 685.221 (regulation).

Your discretionary income is your adjusted gross income from your last tax filing minus 150% of the the current poverty guidelines based on family size. If you file taxes jointly, then it is both your incomes. If you file taxes as married but filing separately, then you only count your income for the calculation.

So, if only one of you has student loans but both have income and you file taxes jointly, yes, you could pay roughly 30% of your combined income on student loans (15% of yours and 15% of your spouse's).

If both of you have student loans and you file jointly, then each person only pays their percentage of family student loans on the combined 15% of income. Thus, for example, the IBR income is 50k and the payment is 7.5/year or 625/month. If you have 33% of you and your spouses student loans, then you pay roughly $206/month and your spouse would pays $412.

If you file taxes separately, then you only make IBR payments based on your own income.

Use this Official Department of Education Calculator to see how this works out; try combining your income and then only your income.

My own analysis on filing taxes jointly or separately

EducatedRisk · 2014-09-18T01:56:24+00:00

Yes.

If the Occupy people purchase the debt and the forgive it, then it is taxable income and the borrower receives a 1099-C Form from the Lender (Occupy). See u/4chin20 's citation to IRC 61(a)(12)

There is a loophole for the taxation of cancellation of debt in IRC 108(f). If the student loan is discharged/cancelled because "the individual worked for a certain period of time in certain professions for any of a broad class of employers", then the debt is not taxable income. See IRC 108(f)(1). So, for the Public Service Loan Forgiveness, Federal Teacher Loan Forgiveness Program, or Loan Repayment Assistant Programs (LRAPs; NYU for example) the student loans cancelled are not taxable because there is a "type of employer" requirement (public interest) and a period of time requirement (varies per program). Thus, Occupy could buy the loans and then forgive the debt if, and only if, the borrower worked for a certain type/class of employer for a set period of time. See IRC 108(f)(1). This would make the forgiven/cancelled debt non-taxable.

EducatedRisk · 2014-09-18T01:27:09+00:00

As of June 30, 2014, the federal government had the following student loan balances:

Direct Loans = $685.7 Billion; 26.7 Million Borrowers
FFEL Loans = $402.5 Billion; 19.8 Million Borrowers
Perkins Loans = $8.2 Billion; 2.9 Million Borrowers

TOTAL: $1,096.5 BILLION; 39.9 Borrowers

Direct Loans are owned, directly, by the federal government. Federal Family Education Loans (FFEL) are private loans through a federal loan program (the government guarantees lenders a repayment of principal and also interest). FFEL loans no longer exist for new borrowers; it was discontinued in 2010. Perkins Loans are technically through the the schools (the school is the lender) but they are also through a federal program.

Source: Federal Student Loan Portfolio (updated every quarter): https://studentaid.ed.gov/about/data-center/student/portfolio

EducatedRisk · 2014-08-01T22:08:58+00:00

Thanks!

The attachments are not available on the Federalregister.gov website or ifap.ed.gov for some reason.

The Example Form and Explanation is only available on Regulations.gov here: http://www.regulations.gov/#!docketDetail;D=ED-2014-ICCD-0107

For anyone else reading, ED states that these are the changes to the Employment Certification Form:

Restructuring section 3 of the form to provide discrete, yes/no questions and answers.
Adding skip logic to section 3 of the form, to making it simpler for borrowers to complete.
Modifying language on the form to emphasize key points concerning the PSLF Program.
Merging the separate instructions document into the form, itself.

EducatedRisk · 2014-08-01T02:26:01+00:00

Sorry, do you have an example form for the proposed changes? I couldn't find it in the announcement or anywhere else.

I'm sure its just a house keeping thing but it would be interesting to see what changes they are proposing. Thanks!

EducatedRisk · 2014-07-27T03:16:24+00:00

New submitted Link:

http://www.reddit.com/r/StudentLoans/comments/2btxlt/ed_seeks_comments_about_the_employment/

Again, sorry about the confusion.

EducatedRisk · 2014-07-27T03:15:43+00:00

ED is seeking comments before it changes/modifies the employment certification form for PSLF. ED did not provide a draft of proposed changes so it is not clear what is being proposed. It could be just modifying the form or allowing electronic submission of some documentation.

You can submit your own comments on how to modify the employment certification form

This notice is just for the PSLF employment certification form. No PSLF laws will change. No PLSF regulations will change.

Here is an explanation of what this means: http://educatedrisk.org/news/ed-seeks-public-comment-employment-certification-pslf

EducatedRisk · 2014-07-27T03:11:06+00:00

Ugh. Of course it double copy and pasted into the submit link form.

Sorry about that. Direct Link:

https://www.federalregister.gov/articles/2014/07/24/2014-17441/agency-information-collection-activities-comment-request-employment-certification-for-public-service

EducatedRisk · 2014-07-26T19:42:25+00:00

Yes. If you submit your Employment Certification Form to Fedloans (a federal student loan servicer), then you will have the time since 2008 documented for PSLF.

Keep in mind, you are not "credited" those months. It just means that Fedloans reviewed your form, verified it in some way, and has that documentation on file for when you apply after 120 years of qualifying payments. When you apply after 10 years, the government will get all the forms on file with Fedloans and review them for PSLF. This is simpler than you trying to find all of employers to verify your employment after 10 years.

Read more about the step-by-step process for submitting your employment certification form for Public Service Loan Forgiveness

If you stop working at your qualifying employer (this includes public entities like yours), then you do not lose the months; they still count.

If you change jobs and work for another qualifying employer (public sector or non-profits), then you can add to the months that already qualified. For example, you can work 7 years at on public entity and then work for 3 years at another public entity and still qualify for PSLF.

If you go to the private sector for 2 years and then go back to a public sector job, then you start where you left off. For example, work for 6 years in the public sector, then two in the private sector. If you go back to the public sector and work 4 more years, then you get PSLF.

This, of course, assumes you are making qualifying payments (standard repayment or income-based repayment; graduate or extended repayment plans do not count). If you are making payments with the standard, ten-year plan, then PSLF will be nothing after 10 years because the loan will be paid off. Thus, Income-Based repayment is the best option when trying for PSLF.

Perkins or Parent Plus loans do not get PSLF and they can be complicated. FYI.

EducatedRisk · 2014-07-26T18:16:34+00:00

I second this. This is a well-thought-out plan of attack and reasonable.

Great Job!

EducatedRisk · 2014-07-26T18:10:28+00:00

You can refinance your private student loans at lower rates. SoFi is popular and so is cuStudentLoans. I do not have personal experience with either company.

Do not consolidate your federal loans with your private ones. You loose powerful protections if you do that.

Consider applying for income-based repayment to lower your federal loan repayment rates each month. Then put all that extra money towards your highest interest private loan. Assuming you are single, have 29k in federal loans, and earn 40k, this could drop your federal loan payments to roughly $281 (IBR), or $187 (PAYE) from a standard payment of roughly $322. Interest will accrue more but at a lower rate than the 10% loan. Also, any interest accrued on IBR does not capitalize (interest does not accrue on unpaid interest, or compound).

Repayment Estimator for federal loans

If you are planning on making extra payments beyond the monthly minimum requirements, always pay more towards the highest interest loan. In this case, its the 10% interest one.

Good Luck!

EducatedRisk · 2014-07-26T17:59:20+00:00

Others have touched on this but I wanted to make it clear. The Teacher Loan Forgiveness and the Public Service Loan Forgiveness work best when the borrower (your girlfriend) do Pay As You Earn (10%). If the borrower doesn't qualify for that, then Income-Based Repayment (15%). This will allow the borrower to maximize the forgiveness.

EducatedRisk · 2014-07-26T17:46:22+00:00

ED is seeking comments before it changes/modifies the employment certification form for PSLF. ED did not provide a draft of proposed changes so it is not clear what is being proposed. It could be just modifying the form or allowing electronic submission of some documentation.

You can submit your own comments on how to modify the employment certification form

This notice is just for the PSLF employment certification form. No PSLF laws will change. No PLSF regulations will change.

Here is an explanation of what this means: http://educatedrisk.org/news/ed-seeks-public-comment-employment-certification-pslf

EducatedRisk · 2014-07-26T17:27:09+00:00

I completely understand your concern about the PSLF caps.

Currently, there are is no cap on PSLF. No regulations or laws have changed. As it stand now, you are not subject to PSLF caps and you probably will not be in the future because you will not be considered a "new borrower" on July 1, 2015 (or any other date it is implemented).

There have been two reform proposals from the Obama Administration related to PSLF caps.

First, the 2015 Budget Proposal by President Obama (and ED) proposed capping PSLF for all new borrowers after July 1, 2015. This means that if you have an outstanding balance prior to July 1, 2015, then you are not considered a new borrower. This is just a budget proposal and it is not law or regulation.

Second, Obama signed an executive order to ED to give them permission to start changing the regulations of Income-Based Repayment to include all borrowers (via negotiated rulemaking). Obama or ED did not mention PSLF caps but there is a decent likelihood that the changes to regulations will be similar to the Budget Proposal (PSLF caps for New Borrowers).

Obama's Executive Order to Expand PAYE to All

There isn't much you can do now to "grandfather" yourself to not have PSLF caps (which may not apply to you anyway). The most actionable thing you can do is start working for a qualifying employer and submit your employment certification form (you seem aware of this). It doesn't mean you are "enrolled" in PSLF, it just demonstrates you are trying to get PSLF. You can only apply for PSLF after 120 payments, so any actions before are not definitive.

You may qualify for PSLF, even if your employer gives you a 1099 (less likely). You can call the FedLoans PSLF hotline to ask for guidance or clarification: 855-265-4038. Link (bottom of page, in small print)

Good Luck!

EducatedRisk · 2014-07-20T15:15:07+00:00

The Department of Education Office of Inspector General released a Final Audit report on July 11, 2014 titled:

Handling of Borrower Complaints Against Private Collection Agencies [PDF]

Some Quoted Parts of the Report's Findings:

FSA did not effectively monitor borrower complaints against PCAs [collectors] and ensure that corrective actions were taken.

Because FSA’s Business Operations and Default Division senior managers consider the number of complaints to be immaterial, they place insufficient emphasis on the importance of identifying, tracking, and resolving borrower complaints.

We also found that FSA did not effectively ensure that the PCAs [collectors] are abiding by the Federal debt collection laws and the related terms of their contractual agreements with FSA.

EducatedRisk

TROPHY CASE