ADEA Washington Update

Administration Proposes Significant Revision to Student Loan Repayment Plans

(Legislation, Education) Permanent link   All Posts
President Obama’s FY15 budget request proposes a variety of changes to student loan programs that would impact students pursuing professional degrees. While Congress is unlikely to pass the president’s budget, these proposals will almost certainly be discussed in connection with the Higher Education Act reauthorization. The proposals aim to make federal student loan programs more fiscally sustainable and broaden the number of student borrowers enrolled in repayment programs tied to their incomes.

Dental students are among those who currently benefit from income-based repayment (IBR) programs and stand to lose if the proposed changes are adopted. Under the Pay-As-You-Earn (PAYE) program, participants currently repay their student loans at a rate of 10% of their monthly discretionary income, and this is capped at the amount they would be paying under a standard 10-year repayment plan. After 20 years of repayment, any remaining debt is forgiven.

The president’s proposal eliminates the monthly payment cap and extends the repayment period to 25 years for those with federal loan balances in excess of $30,000 with an overall loan limit of $138,500 for graduate and professional students. Most dental student borrowers fall in this category, with debt exceeding $200,000 on average. The proposal makes adjustments to the treatment of taxes and interest related to student loans as well.

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