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Second Opinion

Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

Department of Education Starts Process to Expand Income-Driven Repayment Plan

March 6, 2015— The Department of Education Feb. 24-26 held the first session of the 2014-2015 negotiated rulemaking committee to begin discussions on expanding the Pay-As-You-Earn (PAYE) repayment plan.

In June 2014, President Obama issued a presidential memorandum, ordering the Department of Education to expand PAYE to all borrowers by the end of 2015 [see Washington Highlights, June 13, 2014]. At the first session, the department proposed creating a new repayment plan, dubbed “PAYE 2,” to accomplish this goal. 

PAYE limits borrowers’ monthly repayments to 10 percent of their discretionary income. Currently, to qualify for PAYE you must have no loans prior to Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. As such, physicians with loans prior to 2007 who have not completed their residency training are most likely to benefit from the change.

In addition to PAYE2, the department would continue to offer the current PAYE, Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR), sparking concerns from negotiators that the repayment system is too complex. Department officials are in favor of a consolidated, single income-driven plan, but indicated congressional action would be necessary.

In future sessions, negotiators will have the opportunity to discuss a PAYE2 structure that differs from PAYE, including changes proposed in the President’s budget [see Washington Highlights, Feb. 6]. Those changes might include modifying the partial financial hardship criteria, limiting the accrual of unpaid interest, and eliminating the monthly repayment cap.

The committee is also charged with developing rules for loan holders to identify servicemembers that are eligible for lower interest rates under the Servicemembers Civil Relief Act. Further, the department tentatively agreed to discuss five additional topics during the rulemaking sessions:

  • Transfer of borrower information during loan rehabilitation;
  • Statutory technical changes not yet in regulation (regarding rehabilitation collection fees and the sale of defaulted loans prior to rehabilitation);

  • Cohort default rate (CDR) appeals based on a low participation rate index (PRI);

  • Treatment of Department of Defense payments under forgiveness programs; and

  • PAYE renewal notifications by servicers.

The negotiated rulemaking committee is scheduled to meet next on March 31.

Contact:

Matthew Shick, JD
Director, Gov't Relations & Regulatory Affairs
Telephone: 202-862-6116
Email: mshick@aamc.org

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.


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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org