Sue O’Flaherty | Dec. 2014

U.S. Department of Education

Student Loan Servicing Summit

Income-Driven Repayment

IDR Topics

• Overview of IDR

• Application Processing

• Borrower Awareness

• Review of ‘Billy Borrower’

• Discussion

Repayment Plan Usage

• $133B of the $436B Direct Loan portfolio in repayment is in an IDR plan (30.4%).• As expected based on the relatively “better” benefits of the IBR and PAYE repayment plans, the increase in IDR

usage is driven by increased participation in the IBR and PAYE repayment plans.• IBR portfolio has increased from $51B (2013 Q3) to $101B (15 Sep 14).• PAYE portfolio has increased from $1.3B (2013 Q3) to $11.8B (15 Sep 14).• Level 10-year (standard) as a percentage of total DL portfolio has been trending downward.

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Income-Driven Plans - Overview

• Three main plans• Income-Contingent Repayment Plan (ICR) – 1994

• Direct Loan Program only

• Income-Based Repayment Plan (IBR) – 2009• Available in both the Direct Loan and FFEL Program• New terms and conditions for “new borrowers” on/after July 1, 2014

• Pay As You Earn Plan (PAYE) – 2012• Direct Loan Program only• For new borrowers in FY 2008 who receive new loans in FY 2012• Modeled on IBR, incorporating statutory IBR changes scheduled to take effect for

new borrowers in 2014• Negotiated rulemaking in 2015

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Capitalization

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Loan Forgiveness

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Qualifying repayment includes:• Repayment under an income-

driven plan• Repayment under the 10-year

standard repayment plan (or any other repayment plan with a payment amount at least equal to the 10-year standard plan amount) or

• Economic hardship deferment

Applying: Reasons & Plan Selection

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Direct Loans FFEL Program Loans

IBR □ □

Pay As You Earn □ Not Available

ICR □ Not Available

Place me on plan with lowest

payment

□Only IBR will be considered for FFEL

Program Loans

Applying: Electronic or Paper

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ADOI = “alternative documentation of income”; not AGI.

Applying: Income Documentation

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Applying: Income Documentation

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If borrower is married and files a joint tax return, also need ADOI of spouse.

Application: Electronic

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*If borrower submits documentation by hard deadline, payment amount will not change if loan servicer cannot process it before anniversary date.

Annual Life Cycle

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Repayment Estimator_v3

Repayment Estimator

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2013-14 E-mail Campaign Results

*Campaign results as of May 2014

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Billy Borrower

• Billy Borrower:• Is single with no dependents and lives in Georgia• Has an AGI of $35,000 that rises at 5% per year and • Has $50,000 in Direct Loan debt ($23,000 of which is subsidized),

all of which has a 4.66% interest rate• Billy is not a new borrower on/after July 1, 2014

• Note: The repayment estimator projects the poverty guidelines and the income percentage factors uses a fixed 3.3%. Beginning mid- December, it will use the Congressional Budget Office’s (CBO) estimates of future inflation. The comparisons on the next few slides uses the CBO estimates.

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Billy - All IDR Plans

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Year IBR ICR PAYE1 $219 $373 $1462 $237 $378 $1583 $256 $383 $1714 $275 $388 $1835 $296 $393 $1976 $317 $398 $2117 $339 $403 $2268 $363 $408 $2429 $388 $414 $259

10 $414 $419 $27611 $442 $425 $29512 $472 $431 $31413 $503 $437 $33514 $522 $443 $35715 $522 $449 $38016 $522 - $40417 $522 - $43018 - - $45719 - - $48620 - - $51621 - - -22 - - -23 - - -24 - - -25 - - -

Billy Borrower – Comparison

ICR IBR PAYE

Initial Payment $373 $219 $146

Final Payment $449 $522 $516

Time 14 yrs., 2 mos. 16 yrs., 7 mos. 20 years

Total Paid $69,004 $76,391 $72,529

Forgiveness $0 $0 $17,816

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Standard Extended

Payment $522 $333

Time in Repayment 10 years 25 years

Total Paid $62,647 $99,743

Discussion, Q&A, New Ideas?

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