Title IV Student Loan Repayment and Discharge Provisions
Final regulations were published in the Federal Register (http://www.ifap.ed.gov/fregisters/FR110112FinalRule.html) on Nov. 1 affecting the following Title IV student loan repayment and discharge provisions:
- Income-based repayment (IBR) plan - incorporates statutory changes to the provisions made by the SAFRA Act, and includes new provisions regarding:
- Notification of income documentation requirements.
- Notification of repayment options after leaving an IBR plan.
- Notification of the forgiveness process at the end of the IBR plan.
- Income contingent repayment (ICR) plan - creates a new plan for Direct Loan borrowers under President Obama's "Pay As You Earn" initiative. The Pay As You Earn plan will:
- Be available to a new borrower on or after Oct. 1, 2007, who:
- Receives at least one Direct Loan disbursement on or after Oct. 1, 2011, or receives a Direct Consolidation Loan based on an application received on or after Oct. 1, 2011.
- Has a partial financial hardship.
- Limit the monthly student loan payments to 10% of disposable income.
- Result in forgiveness of any balance remaining after 20 years.
- Total and permanent disability (TPD) discharge - streamlines and adds clarity to the process by:
- Allowing Perkins and FFEL borrowers to apply directly to the Department for TPD discharge.
- Allowing for TPD discharge based on an award of disability benefits by the Social Security Administration (SSA), if the individual's eligibility for benefits will be reviewed no more frequently than every five years, but no less frequently than every seven years. Also provides that:
- A borrower whose loan has been discharged on the basis of an SSA determination is still subject to the three-year income-monitoring period.
- A loan that has been discharged on the basis of an SSA determination will be reinstated if SSA determines that the individual is no longer disabled, or that benefits will no longer be reviewed on the five- to seven-year schedule.
The effective date for these regulations is July 1, 2013; however, the regulatory changes related to IBR annual income documentation, forbearance, and recalculation of the payment amount, are eligible for early implementation. In addition, the Department intends for the ICR Pay As You Earn provisions to be implemented as soon as possible; a separate Federal Register will be published to announce when this option becomes available to borrowers.
Questions regarding these regulations may be directed to OCAP Compliance at 405-234-4432.
Director for Default Prevention, Compliance & Training Services
P.O. Box 3000
Oklahoma City, OK 73101-3000