1. Income-Driven Repayment
Sue O’Flaherty | Dec U.S. Department of Education Student Loan Servicing Summit

2. IDR Topics Overview of IDR Application Processing Borrower Awareness
Review of ‘Billy Borrower’
Discussion

3. 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.

4. Income-Driven Plans - Overview
4/17/2017
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
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 4

5. ICR IBR PAYE Capitalization Negative amortization 10% limit
4/17/2017
Capitalization
ICR
Negative amortization
10% limit
Normal rules apply
IBR
Income-based  Non-income-based payment
Leaving the plan
Normal rules suspended
PAYE

6. Loan Forgiveness IRS: “it’s taxable” Qualifying repayment includes:
4/17/2017
Loan Forgiveness
IRS: “it’s taxable”
IBR: 25 years
ICR: 25 years
PAYE / “new” IBR: 20 years
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

7. Applying: Reasons & Plan Selection
Initial application
Annual recertification
Early recertification
Direct Loans
FFEL Program Loans
IBR □
Pay As You Earn
Not Available
ICR
Place me on plan with lowest payment
Only IBR will be considered for FFEL Program Loans

8. Applying: Electronic or Paper
4/17/2017
Applying: Electronic or Paper
Select reason for submitting form
Select plan, if submitting form to initially apply
Provide information about spouse, if applicable
Certify family size
Determine what kind of income documentation to submit
Submit documentation of AGI or ADOI
ADOI = “alternative documentation of income”; not AGI.

9. Applying: Income Documentation
File tax return in two most recent years?
Yes
AGI significantly different from current income?
Alternative Documentation of Income No
AGI
Alternative Documentation of Income (ADOI)

10. Applying: Income Documentation
AGI
Electronic Application
Tax Return
Tax Return Transcript
ADOI
Pay stubs, unemployment benefits, etc.
Self-certification of zero income
Provide electronically only if zero income
If borrower is married and files a joint tax return, also need ADOI of spouse.

11. Application: Electronic
4/17/2017
Application: Electronic
Who
Borrowers with ED-held loans
Borrowers with commercially held loans serviced by ED servicer
Borrowers with other commercially held FFELP loans if servicer signs up
When
IBR-only: September 2011
ICR/PAYE: December 2012
Where
StudentLoans.gov
How
Pulls most recent return from two most recent years
Allow self-certification of no income
Produces pre-populated paper application for ADOI borrowers

12. Annual Life Cycle
Month 0
Borrower applies: 2/14/2014
Month 1
Borrower enters plan: 3/1/2014
Month 2
Borrower receives educational notice about plan: 3/2/2014
Month 9
Borrower receives request to submit new income documentation: 11/26/2014
Month 10
Soft deadline: 1/25/2015
Month 11
Hard deadline*: 2/4/2015
Month 12
Anniversary date: 3/1/2015
*If borrower submits documentation by hard deadline, payment amount will not change if loan servicer cannot process it before anniversary date.

13. Repayment Estimator_v3

14. Repayment Estimator Repayment plan selection in loan consolidation
Repayment plan selection in Exit Counseling, along with ability to request repayment plan type
Repayment Estimator located outside of log-in

15. 2013-14 E-mail Campaign Results
ACTION TAKEN
COHORT
16% made a payment
3% applied for IDR
days delinquent
12% made a payment
2% applied for IDR
days delinquent
37% made a payment
9% applied for IDR
Owe more than $50K and entered repayment in the last year
35% changed status to in repayment
In deferment or forbearance for reasons of financial hardship or unemployment
13% applied for IDR
In grace period and owe more than $25K
11% made a payment
26% changed status to repayment, deferment or forbearance
Defaulted loan status or greater than 270 days delinquent
*Campaign results as of May 2014

16. Billy Borrower Billy Borrower:
4/17/2017
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.

17. Billy - All IDR Plans 4/17/2017 Year IBR ICR PAYE 1 $219 $373 $146 2
$237
$378
$158 3
$256
$383
$171 4
$275
$388
$183 5
$296
$393
$197 6
$317
$398
$211 7
$339
$403
$226 8
$363
$408
$242 9
$414
$259 10
$419
$276 11
$442
$425
$295 12
$472
$431
$314 13
$503
$437
$335 14
$522
$443
$357 15
$449
$380 16 -
$404 17
$430 18
$457 19
$486 20
$516 21 22 23 24 25

18. Billy Borrower – Comparison
4/17/2017
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
$17,816
Standard
Extended
Payment
$522
$333
Time in Repayment
10 years
25 years
Total Paid
$62,647
$99,743

19. Discussion, Q&A, New Ideas?