The Department of Education’s latest round of negotiated rulemaking begins tomorrow. The Department has set out a limited, but important agenda, focusing on income-driven repayment and benefits for military service members. Specifically, the Department has said that the agenda will be to: (1) prepare proposed regulations to establish a new Pay as You Earn repayment plan for those not covered by the existing Pay as You Earn Repayment Plan in the Federal Direct Loan Program, and (2) establish procedures for Federal Family Education Loan (FFEL) Program loan holders to use to identify U.S. military servicemembers who may be eligible for a lower interest rate on their FFEL Program loans under the Servicemembers Civil Relief Act (SCRA).
The first issue relates to President Obama’s commitment, announced in June 2014, to make student loans more affordable for borrowers. The President stated a goal of allowing borrowers to cap their income-driven payments at 10% of disposable income. Eligible new borrowers already have this benefit through the Pay As You Earn (PAYE) plan. The idea is to expand this standard to all borrowers. One key question is whether the negotiators will try to make changes to the program’s eligibility criteria. For example, they may want to more closely target the program benefits to lower income borrowers. This remains to be seen, but there is a lot at stake as this process gets going tomorrow.
The proposed changes for service members currently on the agenda mainly involve formalizing the practice already occurring in the Direct Loan program of requiring loan servicers to affirmatively identify servicemembers who may be eligible for lower interest rates under the Servicemembers Civil Relief Act.
Another key question is whether the Department will agree to add other items to the agenda or stick with focusing on income-driven repayment and SCRA. Stay tuned to find out how this goes.
The process can unfold in different ways, but the Department’s goal is to try to get the negotiators to agree to a consensus on all agenda items over the course of three multi-day meetings. If the negotiators reach a consensus, they agree not to comment unfavorably on the results. The negotiators cannot bind all of their members to the consensus (if they are organizations with members) but they can agree that their own organizations will not comment unfavorably. Other groups and the public are free to offer comments during the meetings (there is a public comment period for those attending in person) and afterwards when the Department publishes a notice requesting comments. If there is no consensus reached, the Department can publish a proposal that may or may not reflect the discussion during the meetings. This proposal will be open to comments from everyone. This is likely to occur on a tight time table as President Obama said he wanted to make the new income-driven plan available by December 2015.
