The U.S. Departments of Treasury and Education will establish a system for electronically sharing tax data for federal student loan borrowers in Income-Driven Repayment plans.
The digital platform, housed at the Department of Education’s Office of Federal Student Aid (FSA), will simplify income-driven repayment plans for borrowers. Borrowers can give consent to the Internal Revenue Service to share certain information with FSA and its loan servicers for a period of at least five years.
The shared information will be limited to what is necessary for the purpose of determining loan payment levels under income-driven repayment (IDR) plans. Borrowers can revoke their consent at any time.
The new system would eliminate the current requirement that calls for borrowers to send their income information to FSA on an annual basis.
“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.”
Borrowers who fail to provide income information in a timely manner see their IDR payments dramatically increase due to the payments being reset by law. Those payments are typically reset to 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,” U.S. Under Secretary of Education Ted Mitchell said.