Final Regulations from the Department of Education
The Department of Education has released the final regulations that govern the Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF) programs.
Over the summer, many of you joined the call for fair treatment of married borrowers in IBR and timely confirmation of eligibility for PSLF. Unfortunately, the final rules are not a satisfactory response.
Now it's up to Congress to eliminate IBR's "double-counting penalty" for married borrowers. We'll work to make that happen in the coming months and let you know how you can help. As for PSLF, the Department acknowledged the need for more clarity about the process but stopped short of committing to annually certifying eligibility. We'll keep pressing the agency on this issue and make sure the next administration knows it's a priority.
The new rules also include several important clarifications and changes. One is that IBR eligibility will be based on the amount you owed when you first started repayment. This is good news for most borrowers already in repayment, since their original debt level is likely to be higher than whatever they owe when they apply for IBR. However, borrowers whose debt rose while in repayment may not benefit from IBR as much as they hoped. We have already updated the calculator at IBRinfo.org to reflect this clarification and will be making other updates to the site this week. We'll let you know when they are complete.
Iowa Concludes Investigation into High Debt
A year ago we testified before Iowa state legislators about the state's unfortunate and persistent status as having the highest student debt in the nation. Our analysis pinned the blame on two factors. First, the state's need-based grant aid was inadequate given tuition levels at its community colleges and public universities. Second, students were being encouraged to take advantage of "easy access to deceptively tame private loans" offered by a state-created loan company, the Iowa Student Loan Liquidity Corporation (ISL).
The non-profit company vigorously denied that its activities had anything to do with students' high levels of debt. But the results of an investigation by the Iowa Attorney General, released on Friday, are clear: ISL's "troubling" practices misled students and families into taking out loans that were not in their best interests. Moreover, in the process of the investigation, ISL's executives were "slow to understand" the problems with their marketing materials and "reluctant to acknowledge the impropriety" of their tactics.
This should serve as a cautionary tale for other states (such as New York) considering building their own private loan empires.
(This message was sent to the Project on Student Debt mailing list on October 27, 2008.)