Student Loans: Departments of Treasury and Education Move to Simplify Income Driven Repayment Plans

Much of the regulatory focus for student lending has been directed toward Income Driven Repayment (IDR) plans in recent months. The first student loan related move in 2017 by the Departments of Education and Treasury is no exception. On Tuesday, the Departments announced a joint effort to simplify borrower participation in IDR plans.


Currently, borrowers must submit income information every year to continue in their IDR plan. If a borrower fails to timely submit the information, the borrower’s payments are reset to the standard 10-year repayment plan amount, which can be significantly higher. Under the new Memorandum of Understanding, the Departments of Treasury and Education have established a framework for allowing tax data to be shared over multiple years. The Memorandum of Understanding will lead to the development of a new digital system at the Department of Education. Through that system, borrowers will be able to consent to sharing financial data with their servicers. Servicers will then have access to multiple years of financial data and will be able to evaluate a borrower’s financial eligibility to continue on an IDR plan without direct contact with the borrower.


While this development should help streamline the IDR qualification process, servicers should be aware of potential issues. Student loan related efforts at the CFPB have shown the bureau is paying close attention to both IDR plans and borrower communications. Servicers should take care to keep borrowers informed of pertinent information regarding payments and payment plans both now and once the new system is underway.