ED Releases Pay as You Earn & TPD Final Rules
Prepared by: Wes Huffman (whuffman@wpllc.net)
Today, the Department of Education published the first set of regulations stemming from the latest round of negotiated rulemaking on the Title IV Programs. The initial package addresses the acceleration of SAFRA’s increased Income-Based Repayment benefits, also known as “Pay as You Earn,” as well as regulations surrounding the discharge of a Perkins, Direct or FFELP loan for borrowers with Total and Permanent Disability (TPD).
Negotiators, who included COHEAO President Bob Perrin and Vice President Maria Livolsi, were able to reach consensus on this regulatory package. However, because President Obama’s call to accelerate a scheduled increase in IBR benefits was an impetus for the negotiations, the regulations have been separated into two packages for publication in the Federal Reserve to speed up the IBR changes.
Package One, released today, had to be published by November 1, 2012, in order to take effect by July 1, 2013. However, the Secretary also has the authority to call for early implementation of certain regulations and is exercising this authority for the Pay as You Earn regulations. The notice indicates “the Secretary intends to implement the regulations governing the Pay as You Earn repayment plan as soon as possible” and notes a separate Federal Register notice is forthcoming. Package Two, which contains most of the Perkins Loan specific regulations, is expected later this year or even January 2013. Those regulations will be effective on July 1, 2014.
Below is a summary of the major provisions of the regulations, as identified by the Department:
The final regulations will—
• Create a new ICR plan (the Pay As You Earn repayment plan) in the Direct Loan program based on the President’s Pay As You Earn repayment initiative. The regulations support the administration’s goal of making the statutory improvements made by the SAFRA Act included in the Health Care and Reconciliation Act of 2010 (Pub. L.111–152) to the IBR plan available to some borrowers earlier than July 1, 2014, and make technical corrections and minor changes to the current ICR plan regulations, including the addition of provisions related to notification of income documentation requirements and the ICR loan forgiveness process.
• Amend the regulations governing the IBR plan to incorporate statutory changes made by the SAFRA Act and add new provisions related to notification of income documentation requirements, repayment options after leaving the IBR plan, and the IBR loan forgiveness process.
• Revise the Perkins Loan and FFEL program regulations to permit borrowers to apply directly to the Department for a TPD discharge. In the Direct Loan program, borrowers would continue to apply directly to the Department for TPD discharges, as they do under the current Direct Loan regulations.
• Revise the Perkins, FFEL, and Direct Loan program regulations to permit a TPD discharge based on a borrower’s Social Security Administration (SSA) notice of award for Social Security Disability Insurance (SSDI) benefits or Supplemental Security Income (SSI) benefits indicating that the borrower’s eligibility for disability benefits will be reviewed on a five- to seven-year schedule. This five- to seven-year review schedule classifies the borrower as permanently impaired—medical improvement not expected. Borrowers will still be subject to the three-year discharge review that is currently in place.
• Make conforming changes throughout the Perkins, FFEL, and Direct Loan program regulations referencing the use of an SSA disability notice of award in the TPD process.
• Reinstate a title IV loan discharged based on the borrower’s TPD if the borrower receives a notice from the SSA indicating that the borrower is no longer disabled or the borrower’s continuing disability review will no longer be the five- to seven-year period indicated in the SSA disability notice of award.
• Require a Perkins, FFEL, or Direct Loan borrower to notify the Secretary, during the three-year period following a TPD discharge, if the borrower has been notified by the SSA that the borrower is no longer disabled or that the borrower’s continuing disability review will no longer be the five- to seven-year period indicated in the SSA disability notice of award.
• Modify regulations in the Perkins Loan, FFEL, and Direct Loan programs to provide more detailed information to borrowers in letters explaining why a disability discharge has been denied.
• Define the term ‘‘borrower’s representative’’ for purposes of the disability discharge application process and state that references to a borrower or a veteran in the TPD discharge regulations include a borrower’s representative or a veteran’s representative.
• Specify that the Department will deny a disability discharge application and collection will resume on the borrower’s loans if the borrower receives a disbursement of a new title IV loan or receives a new grant under the Teacher Education Assistance for College and Higher Education (TEACH) grant program made on or after the date the physician certified the borrower’s disability discharge application or on or after the date the Secretary receives the borrower’s SSA disability notice of award and before the date the Department makes a decision on the borrower’s application for a TPD discharge.
• Specify that if a borrower’s Perkins, FFEL, or Direct Loan program loan is reinstated, it returns to the status that it would have had if the TPD discharge application had not been received.
• Make corresponding changes to the TPD application process based on a certification from the Department of Veterans Affairs.
The full regulations are available online at the link below. We will be providing updates on the publication of “Package Two” and additional information from the Department on implementing Pay as You Earn. http://www.gpo.gov/fdsys/pkg/FR-2012-11-01/pdf/2012-26348.pdf
