Federal Government Aims to Ease Paperwork for Loan Repayments
The U.S. Departments of Treasury and Education announced today that they working on a system to electronically share tax data from multiple years for federal student loan borrowers participating in Income-Driven Repayment (IDR) plans.
The plan is aimed at creating a new digital system at the U.S. Department of Education’s Office of Federal Student Aid (FSA). It will simplify income-driven repayment plans.
The system will benefit borrowers because federal loan recipients who fail to provide annual tax information in a timely fashion typically see their IDR payments dramatically increase. Payments are reset by law when no income information has been submitted. In such cases, payments are reset based on the amount needed to pay off the loan under a 10-year schedule, rather than the borrower’s income.
The system eliminates the current need for borrowers to submit additional income statements or annual authorization to the federal government. Borrowers must agree to let their tax information be shared between the IRS and FSA. That information will date back five years.
“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.”
The consent system will be housed at the U.S. Department of Education. Information that is shared with Education will be limited to what is necessary for determining eligibility for the repayment plans.