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Congressman Ryan Costello

Representing the 6th District of Pennsylvania

Costello, Bonamici Call on Administration to Help Student Loan Borrowers Keep Payments Affordable

March 7, 2017
Press Release

Washington, D.C.  – Rep. Ryan Costello (R-PA) and Rep. Suzanne Bonamici (D-OR), the Vice Ranking Member of the Education and the Workforce Committee, along with Representatives Peter Welch (D-VT), Patrick Meehan (R-PA), Jared Huffman (D-CA), Carlos Curbelo (R-FL), Seth Moulton (D-MA), and Elise Stefanik (R-NY), sent a letter to the Department of Education and the Department of the Treasury urging them to implement a plan that will make it easier for student loan borrowers to access affordable payments. Thirty-one additional Representatives also signed the letter.

In January, the Departments announced a plan to help student loan borrowers by automatically certifying the income of borrowers enrolled in income-driven repayment plans. Student loan borrowers who are enrolled in income-driven repayment plans must submit updated income information each year; however, data suggest that many borrowers do not update their income information by the annual deadline. Failing to recertify on time can lead to a sudden increase in payment amounts and financial hardship. For some borrowers, missing the recertification deadline can place them on the path to default. The letter sent today asks the Departments to implement their automatic recertification plan without delay.

“The Departments’ Memorandum of Understanding (MOU) outlining a multi-year consent system that uses tax data to automatically recertify student loan borrowers’ income information will help millions of borrowers access affordable payments and avoid delinquencies and defaults,” the Members wrote. “Failure to meet annual recertification deadlines can increase the risk of default and lead to long-term financial hardship for borrowers. Today, more than 8 million borrowers are in default. Many more are behind on their payments. These people—roughly one quarter of student loan borrowers—face serious long-term consequences. Borrowers in default can lose access to federal student aid, see their Social Security benefits and tax refunds withheld, and have their wages garnished. Additionally, credit reporting agencies register defaults, which may affect borrowers’ access to financing in the future for a car, a business, or a home. With a multi-year consent system in place, more borrowers will be able to avoid these negative outcomes.”

Last year, Bonamici and Costello introduced bipartisan legislation to help struggling student loan borrowers enroll in affordable repayment plans. The SIMPLE (Streamlining Income-driven, Manageable Payments on Loans for Education) Act allows at-risk borrowers to make more informed decisions about which repayment plans are right for them, and it automatically connects these borrowers with income-driven repayment plans before they default. Additionally, the SIMPLE Act automates the annual process of updating borrowers’ income information while they are enrolled in income-driven repayment plans, which will prevent unexpected increases in loan payments and help keep payments affordable. You can read a summary of the SIMPLE Act here and the full text of the bill here.

You can read the letter here or below.

Dear Secretary Mnuchin and Secretary DeVos:

We commend the U.S. Department of the Treasury and the U.S. Department of Education (the Departments) for reaching an agreement to simplify participation in income-driven repayment (IDR) plans. We respectfully ask that you implement this agreement as expeditiously as possible.    

The Departments’ Memorandum of Understanding (MOU) outlining a multi-year consent system that uses tax data to automatically recertify student loan borrowers’ income information will help millions of borrowers access affordable payments and avoid delinquencies and defaults. In 2015, bipartisan Members of Congress urged the Departments to use borrowers’ tax data to automatically recertify their income information each year. We are pleased that the Departments have taken the first step toward developing such a system.

Student loan borrowers who are enrolled in IDR plans must submit updated family size and income information each year. If borrowers do not provide the documentation by their annual deadline, their monthly payments can increase sharply. These payment spikes may force borrowers to place their loans in forbearance, where their progress toward repayment and forgiveness is halted. Additionally, interest on their loans is capitalized, which may increase total costs by thousands of dollars. A 2015 survey of borrowers found that 57 percent did not recertify their income information on time.

Failure to meet annual recertification deadlines can increase the risk of default and lead to long-term financial hardship for borrowers. Today, more than 8 million borrowers are in default. Many more are behind on their payments. These people—roughly one quarter of student loan borrowers—face serious long-term consequences. Borrowers in default can lose access to federal student aid, see their Social Security benefits and tax refunds withheld, and have their wages garnished. Additionally, credit reporting agencies register defaults, which may affect borrowers’ access to financing in the future for a car, a business, or a home.

With a multi-year consent system in place, more borrowers will be able to avoid these negative outcomes. As we continue working in Congress to further simplify the enrollment and recertification processes for IDR plans, which help student loan borrowers who are struggling to manage their payments, we encourage you to advance a multi-year consent system without delay, and in a manner that eliminates unnecessary complexity for borrowers. We respectfully request an update on the Departments’ progress toward implementing the MOU. 

We appreciate your attention to our request, and we look forward to working with you to make sure millions of student loan borrowers have easy access to the affordable repayment options that can protect them from financial turmoil.

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