Comments to the Department of Education on proposed IDR changes

Never before has the Department eliminated a repayment option contractually available in the federal student loan Master Promissory Note.  Not only is this a dangerous precedent to set, but it will also negatively impact many veterinarians with student loans.  Between 80-90% of veterinary school graduates carry federal student debt.

In the Department’s own assessment of these changes, “It is estimated that, because of the significantly larger benefits available through the REPAYE plan, most student borrowers would not be worse off by losing access to PAYE or ICR, especially since these would be borrowers not currently enrolled in one of those plans and not all borrowers are eligible for PAYE. The possible exceptions would generally be circumstances either involving graduate borrowers who would prefer higher payments in exchange for forgiveness after 20 years or borrowers who anticipate having payments based upon their income that would be above what they would pay on the 10-year standard plan.”

Mathematically, your assessment regarding borrowers not being worse off is incorrect. Veterinarians who are eligible for PAYE and not the new IBR will pay more in the new REPAYE than they would using PAYE. The VIN Foundation Student Loan Repayment Simulator quantifies this reality. It’s hard to overstate how helpful PAYE is for veterinarians. The shorter duration to forgiveness financially and emotionally outweighs the improvements to REPAYE. Unfortunately, knowingly, or unknowingly, many are not using PAYE.  By phasing it out before they get a chance to use it, the Department will create further frustration when these borrowers find themselves left with REPAYE as their best remaining repayment option, essentially forcing them into repayment longer than they otherwise could be with PAYE as an option.  This includes the multitude of veterinarians who have either been misinformed by their loan servicers, who have not yet discovered PAYE, or who are still in school, planning to choose PAYE but may find it unavailable by the time they graduate and can apply for it.

Another large group of veterinarians will be worse off if ICR is phased out.  The eagerly awaited one-time forgiveness count adjustment will help many veterinarians who have been in repayment for decades see an end to repayment sooner rather than later.  For those who have some forgiveness time remaining after the count is applied, ICR can be the best option to satisfy those payments.  It is misguided to phase-out ICR when finally, it will have some utility beyond those with Parent PLUS loans.

Changing an existing plan and eliminating current plans is a dangerous precedent to set. While you are seeking to improve situations for borrowers, not all borrowers will see an improvement.  Additionally, a future administration may now try to “improve” the system for another constituent group. Please consider, instead, the creation of a new REPAYE plan rather than changing the current REPAYE and phasing out PAYE and ICR.

One of the most common fears I hear from veterinary students and veterinarians around student loans is “What if the government changes things? Eliminates my repayment plan and I’m in repayment longer? How can I trust these plans?” Phasing out existing plans that are spelled out in the master promissory note makes those fears reality.  These are folks who could benefit greatly from these plans, yet they may not use them because of the now legitimate fear that their current plan could be eliminated and replaced by something less helpful.  The Department should not establish a precedent of changing current plans or removing existing plans, like PAYE or ICR. Instead, create a new REPAYE plan and leave PAYE, ICR, and the current REPAYE as is.

Phasing out PAYE and ICR and not allowing borrowers back into those plans if they somehow find themselves in another is going to lock many borrowers out of contractually obligated repayment plans.  Loan servicers have been horrendous at administering the federal student loan repayment plans.  The mistakes and misinformation are well documented and staggering.  At minimum, the Department should establish an appeal process in the event a borrower is mistakenly taken out of a plan they can no longer get back into if it is phased-out.  Thrusting even more responsibility onto those using PAYE or ICR to make sure no mistakes are made going forward is unrealistic and acting against the spirit of these proposed changes.