The two departments announced a plan in January to assist student loan borrowers by automatically certifying the income of borrowers enrolled in income-driven repayment plans. In a letter to Education Secretary Betsy DeVos and Treasury Secretary Steve Mnuchin, the 39 members of congress urged them to implement their automatic recertification plan without delay.
“The Departments’ Memorandum of Understanding outlining a multi-year consent system that uses tax data to automatically recertify student loan borrowers’ income information will help millions of borrowers access affordable payments and avoid delinquencies and defaults,” the letter said.
Currently, student loan borrowers who are enrolled in income-driven repayment plans are required to submit income information each year. Many fail to meet the deadline, however, which can lead to an increase in payment amounts and even defaults.
“Failure to meet annual recertification deadlines can increase the risk of default and lead to long-term financial hardship for borrowers,” the letter said. “Today, more than 8 million borrowers are in default. Many more are behind on their payments. These people—roughly one quarter of student loan borrowers—face serious long-term consequences. Borrowers in default can lose access to federal student aid, see their Social Security benefits and tax refunds withheld, and have their wages garnished. Additionally, credit reporting agencies register defaults, which may affect borrowers’ access to financing in the future for a car, a business, or a home. With a multi-year consent system in place, more borrowers will be able to avoid these negative outcomes.”
Last year, Rep. Ryan Costello (R-PA) and Rep. Suzanne Bonamici (D-OR) introduced the Streamlining Income-driven, Manageable Payments on Loans for Education (SIMPLE) Act, which automatically connects at-risk borrowers with income-driven repayment plans before they default. The bill would also automate the annual process of updating borrowers’ income information while they are enrolled in income-driven repayment plans. It was referred to the House Ways and Means Committee.