Cost estimates for Income-Driven Repayment plans are unreliable
For the fiscal year 2017 budget, the Department of Education (ED) estimated that Income-Driven Repayment (IDR) plans will cost $74 billion. Actual costs will depend on how many borrowers participate in IDR plans and how much (or how little) those borrowers earn over time. After reviewing how ED produces its cost estimates, the Government Accountability Office (GAO) criticized aspects of ED’s methodology and concluded that ED’s cost estimates are not reliable. GAO found that ED’s methods may both over- and under-state actual…
Enrollment in Income-Driven Repayment is Up
Nerds like me will want to check out recently released updates to the Department of Education’s Federal Student Aid Data Center for reports including outstanding balances and recipients by loan program, loan type, loan status, repayment plan, and delinquency status. Unemployment and economic hardship deferments are down 31.5 percent from the previous year, as enrollment in income-driven repayment plans has increased. As of December 31, 2015, approximately 4.8 million borrowers are enrolled in Income-Driven Repayment plans.
Comparing Income-Driven Repayment Plans
There are now five different income-driven repayment plans: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Based Repayment for New Borrowers (New IBR), and now Revised Pay As You Earn (REPAYE). Calculating Monthly Payments Income-driven plans calculate payments as a percentage of “discretionary income”. Discretionary income is defined as the difference between a borrower’s Adjusted Gross Income (AGI) and 150 percent of the poverty guideline for the borrower’s family…
REPAYE application goes live
Borrowers may now enroll in REPAYE using the newly updated electronic Income-Driven Repayment application at studentloans.gov Here’s a preview of the paper application for your viewing enjoyment. The Department of Education’s Repayment Estimator has also been updated to include a REPAYE calculation. And here is the official information about REPAYE and the other Income-Driven Repayment plans posted on studentaid.ed.gov.
Final REPAYE Regs No Big Surprise
At last the final regulations are published! There are a few changes from the draft rules, but nothing major. The best thing? Borrowers can access payments set at 10 percent of "discretionary income" regardless of when we borrowed. Less great: If you borrowed for graduate or professional education, forgiveness is after 25 years rather than 20 years (or 120 payments for Public Service Loan Forgiveness) and spouses will not be able to separate their income, even if they file a separate tax return. Key provisions of the new REPAYE plan…