With the Biden Administration’s plan to cancel the student debt of some 40 million Americans stalled in the courts, the Department of Education recently proposed a less publicized but still vitally important program to offer widespread relief to student loan borrowers. The Department has proposed to revamp Income-Driven Repayment (IDR) plans, which allow borrowers of federal student loans to pay back their loans at lower monthly payment rates. The repayment rates are tied to borrowers’ income and provide for forgiveness of any remaining loan balances after twenty or twenty-five years. IDR plans are lifesavers for students working in public interest and social justice careers. They can enable borrowers to reduce their monthly loan payments from $2,000 to $3,000 under the current standard 10-year repayment plan to a vastly more affordable $0 to $500 a month.
In its notice of proposed rulemaking, the Education Department sought to revise one IDR program, the Revised Pay As You Earn (REPAYE) plan, to allow more borrowers to pay little to no monthly payments. Specifically, the plan would raise the income level below which a person is exempt from consideration for monthly payment amounts from 150 percent to 225 percent of the federal poverty line. That means that an individual borrower who makes less than about $30,600 annually and any borrower in a family of four who makes less than about $62,400 will not have to make anymonthly payment. The revised plan would also help reduce the loan burden for borrowers with undergraduate loans and married borrowers who seek to file their taxes separately from their spouses. Critically, the plan will also provide income benefits to borrowers whose loans “negatively amortize” – that is, their loan balances increase as a result of interest accruing even while they are making regular payments. Borrowers under the new REPAYE plan would not be charged any remaining accrued interest to their account each month after they make their monthly payment.
The Center, alongside Amanda Prasuhn, the Director of Public Interest Financial Support with Berkeley Law’s Financial Aid Office, just filed a public comment supporting the Department’s proposed IDR revision. Our comment describes the critical importance of IDR plans to Berkeley Law students and graduates in public interest legal jobs and provides stories of Berkeley Law alums who will benefit from the Department’s plan. The comment also provides additional recommendations to the Department to further support law student borrowers like those we work with every day.
Public interest lawyers are critical advocates for economic, social, and racial justice for consumers, workers, and members of vulnerable and marginalized groups. Yet all too often, insurmountable student loan debt can be a barrier for graduates from Berkeley Law and other law schools to embark on careers in the public and non-profit sectors. The proposed revisions to the IDR program, if adopted, will greatly improve the current plan. That will enable more law students to participate in public service careers and to serve the clients and goals that brought them to law school in the first place.