New Regulations Address Repayment Plans, Loan Forgiveness

Earlier this month the U.S. Department of Education published final rules that make changes to income-contingent and income-based repayment plans, establish a new income-driven repayment option, and make substantive changes in the processing of loan forgiveness for borrowers who are totally and permanently disabled.

The following are some key highlights:

This newest repayment option will be available only to borrowers whose loans are held under the Federal Direct Loan Program, and then only as follows:

  • The borrower must be a new borrower as defined on or after Oct. 1, 2007.
  • The borrower also must have received loan disbursements on a Direct Loan on or after Oct. 1, 2011.
  • The borrower may not repay under this new plan parent PLUS loans or consolidation loans that include a parent PLUS loan.

​Borrowers must provide documentation of current income as part of the process of applying for the new repayment plan, and must also provide annual income information to continue in the plan.

Regulations permit the early implementation the Pay as You Earn repayment plan. The Department has committed to publishing guidance as soon as possible, to expedite implementation.

Total and permanent disability

Beginning July 2013, all borrowers applying for total and permanent disability discharge under any Title IV loan program — Perkins Loan, Federal Family Education Loan Program or Direct Loans — will apply directly to the Department’s TPD servicer rather than to the school or lender/guarantor.

Borrowers also may apply using certain types of disability determinations from the Social Security Administration. Borrowers whose disability status is confirmed by SSA and who are subject to a status review in five-to-seven years may submit that documentation rather than undergoing the usual TPD loan discharge application under the Title IV loan programs.