Department of Education: Improving Income Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program

B-335436

July 18, 2023

The Honorable Bernard Sanders
Chairman
The Honorable Bill Cassidy
Ranking Member
Committee on Health, Education, Labor and Pensions
United States Senate

The Honorable Virginia Foxx
Chairwoman
The Honorable Bobby Scott
Ranking Member
Committee on Education and the Workforce
House of Representatives

Subject: Department of Education: Improving Income Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Education (ED) entitled “Improving Income Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program” (RIN: 1840-AD81). We received the rule on July 10, 2023. It was published in the Federal Register as final regulations on July 10, 2023. 88 Fed. Reg. 43820. The effective date is July 1, 2024.

ED states that the final rule amends its regulations governing the income-contingent repayment (ICR) and income-based repayment (IBR) plans and renames the categories of repayment plans available in ED’s Direct Loan Program. ED further states that the rule streamlines and standardizes the Direct Loan Program repayment regulations by categorizing existing repayment plans into three types: (1) fixed-payment repayment plans, which establish monthly payment amounts based on the scheduled repayment period, loan debt, and interest rate; (2) income-driven repayment (IDR) plans, which establish monthly payment amounts based in whole or in part on the borrower’s income and family size; and (3) the alternative repayment plan, which ED states that it uses on a case-by-case basis when a borrower has exceptional circumstances or has failed to recertify the information needed to calculate an IDR payment as outlined in 34 C.F.R. § 685.221. Additionally, ED states that the rule makes confirming edits to the Federal Family Education Loan (FFEL) Program in 34 C.F.R. § 682.215.

Enclosed is our assessment of ED’s compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.

Shirley A. Jones
Managing Associate General Counsel

Enclosure

cc: Lynn Mahaffie
Assistant General Counsel for Regulatory Services
Department of Education

ENCLOSURE

REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF EDUCATION
ENTITLED
“IMPROVING INCOME DRIVEN REPAYMENT
FOR THE WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
AND THE FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM”
(RIN: 1840-AD81)

(i) Cost-benefit analysis

The Department of Education (ED) assessed the costs and benefits associated with the final rule. With respect to benefits, ED stated that the benefits for borrowers include more affordable and streamlined income-driven repayment (IDR) plans, as well as a path to avoid delinquency and default. ED stated that streamlined repayment plans also benefit ED due to simplified administration of plans and decreases in rates of delinquency and default. Additionally, ED stated that the rule will reduce negative amortization, which will be a benefit to student loan borrowers, making it easier for individuals to successfully manage their debt. As a result of the reduction in negative amortization, ED stated that borrowers will be able to devote more resources to cover necessary expenses such as food and housing, provide for their families, invest in a home, or save for retirement.

ED stated that the costs associated with the changes to IDR plans include paying contracted student loan servicers to update their computer systems and their borrower communications. ED also stated that taxpayers will incur additional costs in the form of transfers from borrowers who will pay less on their loans than under currently available repayment plans.

ED stated that it believes the rule’s overall benefits will outweigh its costs.

(ii) Agency actions relevant to the Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 603–605, 607, and 609

ED certified that the final rule will not have a significant economic impact on a substantial number of small entities under the Act.

(iii) Agency actions relevant to sections 202–205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532–1535

ED’s final rule does not discuss the Act. In its submission to us, ED indicated that it had not prepared a written statement under section 202 of the Act.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

On January 11, 2023, ED published a proposed rule. 88 Fed. Reg. 1901–1902. Prior to the rulemaking process, ED stated that it invited public input through a series of public hearings in June 2021. ED stated that it received 13,621 comments on the proposed rule. ED responded to comments in the final rule.

Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501–3520

ED stated that the rule contains information collection requirements covered by the Act, and that it has submitted or will submit them to the Office of Management and Budget (OMB) for review. ED further stated that it would provide a draft version of a form containing the relevant information collection requirements through a separate notice in the Federal Register, and that it would invite public comment on that form. Finally, ED stated that it would clear the time and cost burdens associated with this form at a later time and that those burden changes will be assessed to OMB Control Number 1845-0102.

Statutory authorization for the rule

ED promulgated this final rule pursuant to sections 1070g, 1071–1087-4, and 1087a, of title 20, United States Code.

Executive Order No. 12866 (Regulatory Planning and Review)

ED determined that the rule is a significant regulatory action that is subject to review by OMB under section 3(f) of the Order.

Executive Order No. 13132 (Federalism)

ED determined that the rule does not have federalism implications under the Order.