The Departments of Treasury and Education announced today that they have signed a Memorandum of Understanding establishing a framework regarding the requirements for electronically sharing tax data over multiple years for federal student loan borrowers participating in Income-Driven Repayment (IDR) plans.
The agreement is intended to result in the development of a new digital system at the Department of Education’s Office of Federal Student Aid (FSA) that will simplify income-driven repayment plans for borrowers. Such a system will allow student loan borrowers to provide consent for the Internal Revenue Service to share certain information with FSA and its loan servicers for a period of at least five years.
The creation of a multi-year consent system will simplify income-driven repayment plans for student loan borrowers by eliminating the need for these borrowers to send in their income information to FSA on an annual basis, as is currently required.
“A multi-year consent system will provide relief for millions of student loan borrowers and will reduce unnecessary forbearances, delinquencies and defaults,” Treasury Deputy Secretary Sarah Bloom Raskin said. “Income-driven repayment plans provide an affordable option for borrowers, and this multi-year consent system has the potential to improve outcomes for many of them.”
In many cases, borrowers who fail to provide this information in a timely fashion see their IDR payments increase dramatically, when payments must be reset by law and no income information has been submitted. In such cases, payment amounts are reset based on the amount needed to pay off the loan under a 10-year repayment schedule, rather than the borrower’s income.
“Together with our sister agencies, we’ve identified a commonsense partnership that will make it easier, not harder, for millions of Americans with student loans to maintain continued access to the benefits that help them successfully manage loan repayment,” said U.S. Under Secretary of Education Ted Mitchell.
Under the framework agreed to by Treasury and Education, the consent system will be housed at the Department of Education. The information shared with Education will be limited to what is necessary for the purpose of determining loan payment levels under income-driven repayment plans. Student loan borrowers providing this consent will have the option to revoke their consent should they change their mind.
The Administration has remained committed to improving the federal student loan program for borrowers. Streamlining the income recertification process for borrowers in income-driven repayment plans has been a priority of all agencies involved and these agencies will continue to work jointly toward its successful implementation.
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