Student Loan News: Simplifying the FAFSA, Recertification for Income-Driven Repayment

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Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

New bill would pare down the FAFSA, eliminate IDR paperwork, restore HBCU funds

Congress passed the Future Act on Tuesday, drawing bipartisan support to affect significant changes to federal student aid. If signed into law by the president, the bill would simplify the Free Application for Federal Student Aid (FAFSA) and eliminate annual paperwork for borrowers repaying federal loans on an income-driven repayment (IDR) plan.

As we noted last week, it would also permanently fund Historically Black Colleges and Universities and other Minority-Serving Institutions.

Because the legislation would allow the IRS to share taxpayer data with the Department of Education, the FAFSA would shrink by 22 questions, and the recertification process for IDR plans would be automated, according to Inside Higher Ed’s reporting.

How it affects YOU: Whether you’re a current student or an indebted alumnus, the Future Act could simplify your relationship with Federal Student Aid.

A pared-down FAFSA would seem to make it easier for students of all levels to access federal grants, work-study programs and loans. And not having to recertify your income while repaying your federal student debt would take one headache out of the repayment process.

DeVos sets changes to borrower defense program

Education Secretary Betsy DeVos on Tuesday released a new methodology for deciding how much relief applicants can receive via the borrower defense to repayment rule. The rule, introduced in 2016, allows borrowers who were defrauded by their school to have their student loans wiped away.

Under the amendment, DeVos said, an applicant’s eligibility for partial or full loan cancellation will hinge on their employment earnings.

“This new methodology treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm,” DeVos said in the announcement.

Defense to repayment claims were set to resume processing this week, with borrowers being made aware of their eligibility.

How it affects YOU: If you believe you were defrauded by your school or already have a pending application for discharge of your loans, you might bristle at this new framework. Earning a healthy income could limit how much of your student loan debt is eligible for cancellation.

Keep in mind that to receive relief of any amount, you must first meet the other requirements of borrower defense to repayment.

Also in the news…

  • The Department of Education is seeking colleges and universities to participate in an experimental program that could diversify students’ financing options. According to Politico, select schools could limit students’ federal loan borrowing, use federal loan funds to finance income-share agreements or other tools, and incentivize students with loan repayment assistance.
  • The Federal Trade Commission reached a $191 million settlement on Tuesday with the University of Phoenix after the for-profit school’s parent company was accused of misleading students. The FTC charged that Apollo Education Group employed “deceptive advertisements” to overstate its record of helping students land jobs with well-known companies, like Microsoft and Twitter. The nine-figure settlement was the largest the FTC has obtained from a for-profit school to date and includes $141 million in student debt forgiveness for affected borrowers.
  • After suggesting last week that the Department of Education spin off its federal student loan portfolio to an independent agency, DeVos was accused of trying to block a future president’s ability to award mass forgiveness unilaterally, according to Salon’s reporting. Democratic presidential contenders Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have promised such widespread relief if they were to reach the White House.
  • On the campaign trail, former vice president Joe Biden revealed that he has been making payments on his deceased son Beau’s five-figure student loan debt, according to a tweet from a Washington Post reporter. For federal and private loan borrowers, death affects student loan debt in different ways.
  • An executive order signed this week broadens the definition of anti-Semitism when deciding whether to cut federal funding for schools accused of violating Title VI discrimination rules, according to NBC and others.

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