Letter to Hon. Miguel Cardona, Secretary of Education - On Behalf of Student Loan Borrowers

Letter

Dear Secretary Cardona:

Thank you for your commitment to ensuring that higher education is more affordable and
accessible for all students. We know that completing higher education creates a solid foundation
on which Americans can embark on a fulfilling career path and enter the middle class. However,
the high cost of college and the difficulty many borrowers face in repaying their student loans
can create a life-long burden for students and their families after college. As the Department of
Education continues its negotiated rulemaking process to consider improvements to federal
higher education policy, we are pleased that improving income-driven repayment is central to
this discussion. We urge you to include a more generous income-driven repayment plan to help
families afford higher education and more easily repay their student loans.

As you know, in October the Department of Education began its negotiated rulemaking process
to discuss updates to federal financial aid for students, federal student loan repayment programs,
and policy improvements that will make higher education more affordable and accessible. To
expand access to higher education and protect student loan borrowers, we must address the
burden and difficulties that are faced by the more than 40 million student loan borrowers who
collectively hold over $1.5 trillion in student loan debt. Adding to this overwhelming burden,
there are currently eight different federal loan repayment options for borrowers, which can make
it difficult for borrowers to understand their options and choose the best repayment plan for their
circumstances. As a result of this confusion, many borrowers end up in repayment plans that
burden them with unaffordable monthly loan payments and then struggle to make progress
toward repaying their loans.

A fundamental way to address this situation is to ensure that income-driven repayment plans are
more accessible and affordable for borrowers. These repayment plans support borrowers by tying
monthly loan payments to a borrower's income, capping the loan payments at a small percentage
of the borrower's discretionary income, and providing loan forgiveness on the remaining loan
balance after a decade or more of on-time repayments. With this approach, we can better support
borrowers as they make payments on their loans, reduce their likelihood of defaulting on their
student loan debt, keep good credit, and establish a career path after graduation.
Specifically, to better support student loan borrowers, we urge you to consider the following
changes to our student loan repayment system:

* Simplify the enrollment of student loan borrowers in income-driven repayment plans by
sunsetting current income-driven repayment plans and creating a new, more generous
income-driven repayment plan. This will alleviate the burden on borrowers to navigate
the complex student loan repayment system alone and steer them toward a plan that has a
higher chance of supporting their successful loan repayment.

* Cap monthly student loan payments at not more than 10 percent of student loan
borrowers' discretionary income.

* Calculate discretionary income including only an amount equal to 250 percent of the
federal poverty line or at least 200 percent of the federal poverty line based on the
borrower's family size.

* Allow borrowers who earn less than 250 percent or at least 200 percent of the federal
poverty line to make monthly loan payment amounts of zero until their earnings improve
and count these months toward eventual loan forgiveness.

* Forgive any remaining loan debt after not more than 20 years of payments are made in an
income-driven repayment plan. Additionally, this loan forgiveness should not be
considered taxable income.

* Prioritize robust communication with borrowers to ensure they are informed about their
repayment options and about the benefits of income-driven loan repayment plans.

* Increase transparency, oversight, and accountability of student loan servicers, to ensure
borrowers are informed about their loan repayment options and the benefits of incomedriven repayment plans.

Together, these changes will greatly increase the supports that federal student loan borrowers
receive while repaying their loans. Borrowers in income-driven repayment plans have better
outcomes, lower monthly loan payments, and are less likely to default on their student loans than
borrowers in other types of repayment plans. Given the potential for success in this type of
repayment plan, we should make these plans simpler and more generous for borrowers.
Supporting student loan borrowers is good for our economy, good for borrowers, and protects
both taxpayers and borrowers from the severe consequences of student loan default.

The Department of Education has a strong opportunity now to support millions of borrowers and
ease their student loan repayment burden and economic recovery during the COVID-19
pandemic. We recommend that you seriously consider implementing these changes to better
support borrowers and make higher education more affordable and accessible for everyone.