U.S. Departments of Education, Treasury Sign MOU to Help Student Loan Borrowers
1/20/2017 11:42 AM
The agreement is part of an overall framework to simplify income-driven repayment plans for federal student loan borrowers.
The U.S. Department of Treasury and U.S. Department of Education recently signed a Memorandum of Understanding establishing a plan regarding requirements for electronically sharing tax data for federal student loan borrowers, according to a news release issued by both departments Tuesday. The ultimate goal of the MOU is to simplify income-driven repayment plans for the federal student loan borrowers.
“The agreement is intended to result in the development of a new digital system at the Department of Education’s Office of Federal Student Aid (FSA) that will simplify income-driven repayment plans for borrowers,” according to the news release. “Such a system will allow student loan borrowers to provide consent for the Internal Revenue Service to share certain information with FSA and its loan servicers for a period of at least five years.”
The multi-year system will simplify borrowers’ income-driven repayment plans because they will not need to send their income information to FSA each year.
“A multi-year consent system will provide relief for millions of student loan borrowers and will reduce unnecessary forbearances, delinquencies and defaults,” said Treasury Deputy Secretary Sarah Bloom Raskin. “Income-driven repayment plans provide an affordable option for borrowers, and this multi-year consent system has the potential to improve outcomes for many of them.”
The Department of Education noted that in many cases, borrowers who did not provide their income information on a timely basis would see increases in their payments under income-driven repayment plans. “In such cases, payment amounts are reset based on the amount needed to pay off the loan under a 10-year repayment schedule, rather than the borrower’s income,” according to the news release.
The tax information provided to the Department of Education will be limited to what is needed for calculating loan payment amounts under the income-driven repayment plans. Student loan borrowers can also revoke their consent to provide the information at any time.
“The administration has remained committed to improving the federal student loan program for borrowers,” according to the news release. “Streamlining the income recertification process for borrowers in income-driven repayment plans has been a priority of all agencies involved and these agencies will continue to work jointly toward its successful implementation.”
The Department of Education and Consumer Financial Protection Bureau also continue to work on requirements for student loan servicers. In November 2016, ACA International reported, the department released requirements for a new federal student loan servicing system that will consist of a single servicing platform for all borrower accounts held by the department.
The Department of Education, Department of the Treasury and CFPB developed the policies together, which were sent in a memorandum from U.S. Under Secretary of Education Ted Mitchell to Federal Student Aid. They expand on a joint statement of principles on student loan servicing that the agencies released in conjunction with a fall 2015 report to guide improvement in student loan servicing practices, ACA previously reported.
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