The Dept. of Education recently proposed regulations intended to make the student loan repayment process less burdensome and drawn-out. Nearly two dozen consumer advocacy groups say that while these rules should help borrowers, more could be done to ensure that all students benefit.

The Institute for College Access & Success, along with 22 other organizations – including the Center for Responsible Lending, Student Debt Crisis and Americans for Financial Reform – submitted comments [PDF] to the Dept. of Education to strengthen its proposed rules [PDF] in order to help even more consumers stuck under piles of mounting student loan debt.

The Department’s proposed regulations include a new income-driven repayment plan, called Revised Pay As You Earn (REPAYE), that would let all federal Direct student loan borrowers cap their monthly payments at 10% of their discretionary income, regardless of when they borrowed or their debt-to-income ratio.

Discretionary income is defined as earnings above 150% of the poverty line and applies to what can be put toward non-necessities.

Additionally, the plan provides benefits such as preventing ballooning loan balances by limiting interest accrual for borrowers with low income relative to their debt and removing the “standard payment cap” so higher income borrowers pay the same share of their income as lower-income borrowers.

While the consumer groups say the plan would likely help struggling borrowers stay on top of their payments and avoid default, it doesn’t go far enough. Instead, the groups have asked the Dept. to implement several additional changes to ensure all borrowers are afforded the same assistance.

The organizations believe that the Dept. should provide loan forgiveness to all borrowers in REPAYE after 20 years of payments.

Under the current proposal, borrowers in REPAYE who have graduate school loans will be required to make 25 years of payments on all of their loans before any remaining debt is forgiven, while borrowers with only undergraduate loans can receive forgiveness after 20 years.

“Though many borrowers will repay their loans in full before the 20-year period is over, capping loan repayment at 20 years helps borrowers focus sooner on other important priorities, like saving for retirement and their own children’s education,” the groups say.

The organizations also believe that all qualifying payments made before or after consolidation of loans should count toward their forgiveness timeframe.

As the proposal stands, student loans under the REPAYE program would be forgiven after 20 to 25 years of qualified repayments. However, if a borrower were to consolidate their loans prior to enrolling in REPAYE, any payments they made before that time are not considered qualifying.

The groups also take issue with the Department’s use of debt-to-income ration in REPAYE, as the threshold has no relevance, they write.

“It is simply a carryover from other income-driven repayment plans that have different eligibility requirements,” the groups state in their comments. “Capitalizing interest when the borrower’s debt-to-income ratio hits an arbitrary threshold adds unnecessary complexity…and can also increase costs for borrowers whose incomes are low for extended periods of time.”

Finally, the groups suggest that the Dept. implement the use of “multi-year consent” when evaluating a borrower’s income information.

Under the proposal, borrowers who are part of the REPAYE plan must provide the Dept. with new income information each year. If they fail to submit the data they could be bumped to a different repayment plan or dismissed from the program all together.

A multi-year consent would allow the department to automatically access required tax information.

“Implementing multi-year consent for income-driven repayment plans will help ensure that struggling borrowers are able to keep their monthly loan payments manageable and avoid delinquency and default,” the comments state. “It will also significantly reduce the administrative burden for both borrowers and servicers. Borrowers used to be able to provide multi-year consent, and they should be able to again.”

The Department of Education is expected to view all comments related to the proposed regulations and make a determination by this fall.

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