The U.S. Department of Education has been conducting negotiated rulemaking for the past 18 months, a long process that takes into consideration the perspectives of representatives from across all corners of higher education to create the regulations that govern the use of federal student aid funds.
A key step of the process is the Notice of Proposed Rulemaking, when the Department issues its proposed rule and the larger higher education community — institutions, advocates, students, administrators — may comment upon it. Recently, the Department received comments on its proposed income-driven repayment plan, including those submitted by the higher education team at Arnold Ventures.
Under income-driven repayment, monthly payments for federal student loans are determined by a student’s income and family size, not the amount of debt. The current proposed plan will decrease the monthly payment for most borrowers and increase the amount of debt eventually forgiven. While the goal of making debt more manageable is laudable, there are a number of potential unintended consequences, which could hurt students, taxpayers, and the student loan system in the long run. For example, income driven repayment could make it easier for institutions to charge high tuition prices, as many borrowers will be required to pay back less of their debt.
AV proposed several adjustments the Department should consider to meet its goals of reducing the debt burden for borrowers, while also protecting taxpayers and limiting the ability of institutions to raise costs for low-value programs. To name a few:
- More affordable payments for low-income borrowers
- Shorter time-to-forgiveness for low-income borrowers
- A stronger safety net for borrowers who fall behind on payments
- Access to income-driven repayment (IDR) for defaulted borrowers
- Different IDR conditions for student and parent borrowers
Gainful Employment and Other Outcomes
In addition to making some changes to the proposed income-driven repayment plan, there is much more the Department and Congress must do to protect both students and taxpayers and ensure federal student aid dollars are only going to institutions and programs that provide real value for their students. The first step is a strong gainful employment rule, which would require career-oriented programs to deliver meaningful labor market outcomes for graduates. Congress must also get into the game, creating an outcomes-focused quality assurance system to improve and incentivize better outcomes for students across all institutions and programs. There is a long way to go to make sure higher education delivers on its promise of economic mobility and stability for all students, and AV is ready to help drive that reform.
Read our comments here.