Improving Repayment Options for Federal Student Loan Borrowers

[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Presidential Documents]
[Pages 35241-35243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14537]

___________________________________________________________________

Memorandum of June 7, 2012

Improving Repayment Options for Federal Student
Loan Borrowers

Memorandum for the Secretary of Education [and] the
Secretary of the Treasury

More individuals than ever before are using student
loans to finance college. Nearly two-thirds of college
graduates borrow to pay for college, with an average
debt upon graduation of about $26,300. While a college
education remains an excellent investment, this debt
can be overly burdensome, especially for recent
graduates during the first few years of their careers.

The Income-Based Repayment (IBR) plan for Federal
student loans currently allows former students to cap
their student loan payments at 15 percent of their
current discretionary income. This plan can be an
effective tool for helping individuals to manage their
debt, especially during challenging economic times.

Over the past several years, my Administration has
worked to improve repayment options available to
borrowers, including through passage of an enhanced
Income-Based Repayment plan, which will cap a Federal
student loan borrower's monthly payments at 10 percent
of his or her discretionary income starting in 2014.
And we are pursuing administrative action that may
extend these lower payments to some students as soon as
the end of this calendar year.

However, too few borrowers are aware of the options
available to them to help manage their student loan
debt, including reducing their monthly payment through
IBR. Additionally, too many borrowers have had
difficulties navigating and completing the IBR
application process once they have started it.

For many borrowers, the most significant challenge in
completing the IBR application has been the income-
verification process, which, until recently, required
borrowers to provide a signed copy of their income tax
return. Although the Department of Education has
recently removed some of the hurdles to completing the
process, too many borrowers are still struggling to
access this important repayment option due to
difficulty in applying.

Therefore, by the authority vested in me as President
by the Constitution and the laws of the United States
of America, I hereby direct the following:

Section 1. Streamlined Application Process for Income-
Based Repayment Plans. By September 30, 2012, the
Secretary of Education, in coordination with the
Commissioner of Internal Revenue, shall create a
streamlined online application process for IBR that
allows student loan borrowers with federally held loans
to import their Internal Revenue Service income data
directly into the IBR application. This process will
allow income information to be seamlessly transmitted
so that borrowers can complete the application at one
sitting. Federal direct student loan borrowers shall no
longer be required to contact their loan servicer as
the first step to apply.

Sec. 2. Integrated Online and Mobile Resources for Loan
Repayment Options and Debt Management. By July 15,
2012, the Secretary of Education shall:

(a) create integrated online and mobile resources for
students and former students to use in learning about
Federal student aid, including an explanation of (1)
the current IBR plan, which allows student loan
borrowers

to cap their monthly loan payments at 15 percent of
their discretionary income and be eligible to have
their remaining loan balances forgiven after 25 years
of responsible payments; and (2) the proposed Pay As
You Earn plan, which will allow many students to cap
their monthly loan repayments at 10 percent of their
discretionary income and be eligible for loan
forgiveness after 20 years of responsible repayment;
and

(b) develop and make available to borrowers an online
tool to help students make better financial decisions,
including understanding their loan debt and its impact
on their everyday lives. This tool should incorporate
key elements of best practices in financial literacy
and link to students' actual Federal loan data to help
them understand their individual circumstances and
options for repayment.

Sec. 3. Improved Notification of the Income-Based
Repayment Plan. The Secretary of Education shall
instruct Federal direct student loan servicers to make
borrowers aware of the option to participate in IBR
before a student leaves school and upon entering
repayment. Within 1 year of the date of this
memorandum, the Department of Education shall make
available, for institutions of higher education, a
model exit counseling module that will enable students
to understand their repayment options before leaving
school and to choose a repayment plan for their student
loans that best meets their needs.

Sec. 4. General Provisions. (a) Nothing in this
memorandum shall be construed to impair or otherwise
affect:

(i) the authority granted by law to an agency, or the
head thereof; or

(ii) the functions of the Director of the Office of
Management and Budget relating to budgetary,
administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent
with applicable law and subject to the availability of
appropriations.

(c) This memorandum is not intended to, and does not,
create any right or benefit, substantive or procedural,
enforceable at law or in equity by any party against
the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any
other person.

The Secretary of Education is hereby authorized and
directed to publish this memorandum in the Federal
Register.

THE WHITE HOUSE,

Washington, June 7, 2012.