DRAFT Proposed Modifications to Existing Regulations 04/30/2015 Issue Paper 1: Establishing a New Pay As You Earn (PAYE) Repayment Plan Session 3: April 28 30, 2015 Statutory cites: and 455(e) of the Higher Education Act of 1965, as amended Regulatory cites: 685.209, and 685.219(c) Summary of Change: Addeels a new income?contingent repayment plan, called the Revised Pay As You Earn (REPAYE) plan, to ?685.209 of the Direct Loan Regulations. The REPAYE plan is modeled on the Pay as You Earn (PAYE) repayment plan, and would be available to all Direct Loan student borrowers whe regardless of when LIE student borrowerss received their Direct Loans. To target the plan to the neediest borrowers, the REPAYE plan has several new features not in the PAYE plan: 0 For married borrowers filing separately, the AGI of both the borrower and the spouse are used determine whether the borrower has te?a PFH and to calculate the payment amount. A borrower Who is separated from his or her spduse or is unable to reasonably access their spouse?s income, is not required to provide their spduse?s AGI. For subsidized loans, if a borrower?s payment is not sufficient to pay the accrued interest (negative amortization), the Secretary does not charge the borrower the remaining accrued interest for a period not to exceed three consecutive years from the repayment start date under the REPAYE plan, the same as under the PAYE plan. Following this three-year period, under the REPAYE plan, the Secretary charges 50 percent of the remaining accrued interest on subsidized loans during periods of negative amortization. For unsubsidized loans (including Direct PLUS Loans made to graduate students), and for subsidized loans for which the borrower has become responsible for accruing interest due in accordance with Section of the Direct Loan regulations, the Secretary charges 50 percent of the remaining accrued interest during periods of negative amortization. If the combined outstanding balance of a borrower?s loans being repaid under the REPAYE plan is $57,500 or less at the time the borrower initially enters the REPAYE plan, the repayment period is 20 years. 0 if the combined outstanding balance of a borrower?s loans being repaid under the REPAYE plan is greater than $57,500 at the time the borrower initially enters the REPAYE plan, the repayment period is 25 years. DRAFT Proposed Modifications to Existing Regulations 04/30/2015 0 After 20 or 25 years of qualifying repayment, as applicable, the remaining balance ofme borrower?s loans that have been repaid under the REPAYE plan is forgiven. each year a borrower is in the REPAYE plan, the borrower's payment amount is recalculated based on income and family size information provided by the borrower (If a process becomes available in the future that allows borrowers to give consent to access their income and family size from the Internal Revenue Service or another Federal source, the proposed regulations would accommodate use of such a process for recalculating a borrower?s payment amount). There is no cap on the payment amount. 0 For each subsequent year after a__borrower?_? is?in initial year on the REPAYE plan, the Secretary redetermines whether the borrower has a Partial Financial Hardship (PFHL?usi-ngt-he?same?P-FH the borrower does not have a PFH, accrued interest is capitalized. - if the borrower does not provide the income or family size information needed to recalculate the repayment amount, the borrower is removed from REPAYE and placed in an alternative repayment plan. The payment amount under the alternative repayment plan equals the amount required to pay off the loan within 10 years from the date the borrower begins repayment under -the alternative repayment plan, or by the end date of the 20? or 25? year REPAYE repayment period, whichever is earlier. 0 . The borrorewer may return to the REPAYE plan if the borrower provides the income and fam? size information for the period that the borrower was on the alternative repayment plan. If the payments the borrower was required to make under the alternative repayment plan are less than the payments -the borrower would have been required to make under the REPAYE plan, the REPAYE payment amount is adiusted to ensure that the excess amount owedby the borrower is paid in full by the end of the REPAYE repayment period. 0 Payments made under the alternative repayment pian do not count toward pPublic Sservice tloan Fforgiveness, but may count for forgiveness under the REPAYE pian or another income- driven repayment plan if the borrower returns to the REPAYE plan or changes to another income?driven repayment plan. In addition, we've made conforming changes to ?685.208 (Repayment plans); (Pay As You Earn repayment plan); ?685.209(b) (Income-contingent repayment plan);and ?685.221 (Income-based repayment plan); and ?685.219 (Public Service Loan Forgiveness ProgramL: Changes: See attached regulatory text. ?685.208 Repayment plans. DRAFT Proposed Modifications to Existing Regulations 04/30/2015 General?(1) Borrowers who entered repayment before July 1, 2006. A Direct Subsidized Loan, 8 Direct Unsubsidized Loan, a Direct Subsidized Consolidation Loan, or a Direct Unsubsidized Consolidation Loan may be repaid under? (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; (C) The graduated repayment plan in accordance with paragraph of this section; (D) The income-contingent repayment plans in accordance with paragraphs or of this section; or - (E) The income-based repayment plan in accordance with paragraph of this section. (ii) A Direct PLUS Loan or a Direct PLUS Consolidation Loan may be repaid under?- (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; or (C) The graduated repayment plan in accordance with paragraph of this section. (2) Borrowers entering repayment on or after July 1, 2006. A Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan that was made to a graduate or professional student borrower may be repaid under? (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; (C) The graduated repayment plan in accordance with paragraph (9) of this section; (D) The income-contingent repayment plans in accordance with paragraph of this section; or (E) The income-based repayment plan in accordance with paragraph of this section. (ii) A Direct PLUS Loan that was made to a parent borrower may be repaid under? (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; or (C) The graduated repayment plan in accordance with paragraph of this section. A Direct Consolidation Loan that did not repay a parent Direct PLUS Loan or a parent Federal PLUS Loan may be repaid under? (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; (C) The graduated repayment plan in accordance with paragraph of this section; DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (D) The income-contingent repayment plans in accordance with paragraph of this section; or (E) The income?based repayment plan in accordance with paragraph of this section. (iv) A Direct Consolidation Loan that repaid a parent Direct PLUS Loan or a parent Federal PLUS Loan may be repaid under? (A) The standard repayment plan in accordance with paragraph of this section; (B) The extended repayment plan in accordance with paragraph of this section; (C) The graduated repayment plan in accordance with paragraph of this section; or (D) The income-contingent repayment plan in accordance with paragraph of this section. No scheduled payment may be less than the amount of interest accrued on the loan between payments, except under the income-contingent repayment plans, the income?based repayment plan, or an alternative repayment plan. (3) The Secretary may provide an alternative repayment plan in accordance with paragraph (I) of this section. (4) All Direct Loans obtained by one borrower must be repaid together under the same repayment plan, except that? A borrower of a Direct PLUS Loan or a Direct Consolidation Loan that is not eligible for repayment under theggincome-contingent repayment plan or the income-based repayment plan may repay the Direct PLUS Loan or Direct Consolidation Loan separately from other Direct Loans obtained by the borrower; and (ii) A borrower of a Direct PLUS Consolidation Loan that entered repayment before July 1, 2006, may repay the Direct PLUS Consolidation Loan separately from other Direct Loans obtained by that borrower. (5) Except as provided in ?685.209 and ?685.221 for the income-contingent repavment plans sand the income-based repayment plan, the repayment period for any of the repayment plans described in this section does not include periods of authorized deferment or forbearance. Income-contingent repayment plans. (1) Under the income-contingent repayment plan described in the required payment for a borrower who has a partial financial hardship is limited to no more than 10 percent of the amount by which the borrower's exceeds 150 percent of the poverty guideline applicable to the borrower's family size, divided by 12. The Secretary determines annually whether the borrower continues to qualify for this reduced payment based on the amount of the borrower's eligible loans, AGI, and poverty guideline. Under the income-contingent repayment plan described in a borrower's repayment amount is generally based on the total amount of the borrower's Direct Loans, family size, and reported by the borrower for the most recent year for which the Secretary has obtained income information. DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (3) Under the income-contingent repayment plan described in a borrower?s required payment is limited to no more than 10 percent of the amount by which the borrower's exceeds 150 percent of the poverty cmideline applicable to the borrower's family size, divided by 12. unless the borrower?s payment amount is adiusted in accordance with (391$) For the income-contingent repayment plan described in the regulations in effect at the time a borrower enters repayment and selects the income-contingent repayment plan or changes into the income-contingent repayment plan from another plan govern the method for determining the borrower's repayment amount for all of the borrower's Direct Loans, unless?? The Secretary amends the regulations relating to a borrower's repayment amount under the income-contingent repayment plan; and (ii) The borrower submits a written request that the amended regulations apply to the repayment of the borrower's Direct Loans. Provisions governing the income-contingent repayment plans are in ?685.209. 'k ?685.209 income-contingent repayment plans. Pay As You Earn repayment plan: The Pay As You Earn repayment plan is an income-contingent repayment plan for eligible new borrowers. (1) De?nitions. As used in thisparaqraph of this section? 'k If the borrower's payment amount is not suf?cient to pay the accrued interest on the borrower's Direct Subsidized loan or the subsidized portion of a Direct Consolidation Loan, the Secretary does not charge the borrower the remaining accrued interest for a period not to exceed three consecutive years from the established repayment period start date on that loan under the Pay As You Earn repayment plan. Any period during which the Secretary has previously not charged the borrower accrued interest on an eligible loan under the income-based repayment plan or the Revised Pay As You Earn repayment plan counts toward the maximum three years of subsidy a borrower is eligible to receive under the Pay As You Earn repayment plan. On a Direct Consolidation Loan that repays loans on which the Secretary has not charged the borrower accrued interest, the three-year period includes the period for which the Secretary did not charge the borrower accrued interest on the underlying loans. This three-year period does not include any period during which the borrower receives an economic hardship deferment. (6) Loan forgiveness To qualify for loan forgiveness after 20 years, a borrower must have participated in the Pay As You Earn repayment plan and satisfied at least one of the following conditions during that penod: DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (E) Made payments under the income-contingent repayment plan described in paragraph of this section, the Revised Pay As You Earn repayment plan described in paragraph of this section, or the income-based repayment plan described in ?685.221, including a calculated payment amount of $0.00. F) Made payments under the alternative repayment plan described in and (vm prior to changing to a repayment plan described under'6685209 or $685.22al; (59) Received an economic hardship deferment on eligible Direct Loans 9r For a borrower who qualifies for the Pay As You Earn repayment plan, the beginning date for the 20- year period is? (A) If the borrower made payments under the income-contingent repayment plan described in paragraph of this section. the Revised Pay As You Earn repayment plan described in paragraph of this section or the income-based repayment plan described in ?685.221, the earliest date the borrower made a payment on the loan under one of those plans at any time after October 1, 2007; or (B) If the borrower did not make payments under the income-contingent repayment plan described in paragraph of this section, the Revised Pay As You Earn repayment plan described in paragraph of this section, or the income-based repayment plan described in ?685.221? Income-contingent repayment plan: The income-contingent repayment (ICR) plan is an income? contingent repayment plan under which a borrower's payment amount is generally based on the total amount of the borrower's Direct Loans, family size, and AGI. (.111: (3) Other features of the ICR plan?(i) *1 Repayment period. (A) The maximum repayment period under the ICR plan is 25 years. (B) The repayment period includes? (1) Periods in which the borrower makes payments under the ICR plan on loans that are not in default; (2) Periods in which the borrower makes reduced payments under the income-based repayment plan or a recalculated reduced payment after the borrower no longer has a partial financial hardship or stops making income-based payments, as provided in (3) Periods in which the borrower made payments under the Pay As You Earn repayment plan the Revised Pay As You Earn repayment plan; DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (4) Periods in which the borrower made payments under the alternative repayment pian described in and (vii) prior to changing to a repayment plan described under ?685.209 or 685.221' [Note: Although all of the proposed regulatory language for the Revised Pay As You Earn (REPAYE) repayment plan is new, most of it will replicate the reg language for current PAYE. To make it easier to distinguish the differences between the two plans, only REPAYE language that deviates from current PAYE language is shown in redline.] (9) Revised Pay As You Earn repayment plan: The Revised Pay As You Earn repayment plan plan) is an income-contingent repayment plan whim borrower?s montniy payment amount is based on the borrower?s and farming size. (1) De?nitions. As used in this?seetieeparaqraph of this section? Adjusted gross income means the borrower?s adjusted gross income as reported to the Internal Revenue Service. For a married borrower filing jointly, includes both the borrower's and spouse?s income and is used to calculate the payment amount: For a married borrower filing separately, betheach spouses is usedcombined to catcuiate the payment amount, unless, ,?the borrower certifies, on a form approved by the Secretary, that the borrower is -- (A) Separated from? his or her spouse; or (B) Unable to reasonably access the income information of his or her spouse. (ii) Eligible loan means any outstanding loan made to a borrower under the Direct Loan Program or the FFEL Program except for a defaulted loan, a Direct PLUS Loan or Federal PLUS Loan made to a parent borrower, or a Direct Consolidation Loan or Federal Consolidation Loan that repaid a Direct PLUS Loan or Federal PLUS Loan made to a parent borrower; M?Fami/y size means the number that is determined by counting the borrower, the borrower's spouse 7 and the borrower's children, including unborn children who will be born during the year the borrower certifies family size, if the children receive more than half their support from the borrower. Family size does not include the borrower?s'spouse for a borrower filing separately if the borrower is separated from his or her spouse, or if the borrower is filinq separately and is unable to reasonably access the spouse?s income information. A borrower?s family size includes other individuals if, at the time the borrower certifies family size, the other individuals-? DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (A) Live with the borrower; and (B) Receive more than half their support from the borrower and will continue to receive this support from the borrower for the year the borrower certi?es family size. Support includes money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs; M?y) Partial ?nancial hardship means a circumstance in which? (A) For an unmarried borrower, annual amount due on all of the borrower's eligible loans, as calculated under a standard repayment plan based on a 10?year repayment period, using the greater of the amount due at the time the borrower initially entered repayment or at the time the borrower elect_e_ds the REPAYE plan, exceeds 10 percent of the difference between the borrower's AGI and 150 percent of the poverty guideline for the borrower's family size; or (B) For a married the annual amount due on all of the borrower's eligible loans and, if applicable, the spouse's eligible loans, as calculated under a standard repayment plan based on a 10-year repayment period, using the greater of the amount due at the time the loans initially entered repayment or at the time the borrower or spouse electegs the REPAYE repayment-plan, exceeds 10 percent of the difference between the borrower's and spouse's AGI, and 150 percent of the poverty guideline for the borrower's family size; and (mm Poverty guideline refers to the income categorized by State and family size in the poverty guidelines published annually by the United States Department of Health and Human Services pursuant to 42 U.S.C. 9902(2). If a borrower is not a resident of a State identi?ed in the poverty guidelines, the poverty guideline to be used for the borrower is the poverty guideline (for the relevant family size) used for the 48 contiguous States. (2) Terms of the Revised Pay As You Earn repayment plan. Aberrewer?may?seleet?the?PWH - .- e- -- -- - -- - '.Theberrewerisaggregate loan payments of a borrower who selects the REPAYE plan are limited to no more than 10 percent of the amount by which the borrower's exceeds 150 percent of the poverty guideline applicable to the borrower's family size, divided by 12, unless the borrower?s payment amount is adjusted upward in accordance with paragraph section. (ii) The Secretary adjusts the calculated payment if? (A) Except for borrowers provided for in paragraph of this section, borrower's eligible loans are not ggle}y__Direct Loans, in which case the Secretary determines the borrower's adjusted payment by multiplying the calculated payment by the percentage of the total outstanding principal amount of the borrower's eligible loans that are Direct Loans; (B) Both the borrower and borrower's spouse have eligible in which case the Secretary determines? (1) Each borrower's percentage of the couple's total eligible loan debt; (2) The adjusted payment for each borrower by multiplying the calculated payment by the percentage determined in paragraph of this section; and DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (3) if the borrower?s loans are held by multiple holders, the borrower's adjusted Direct Loan payment by multiplying the payment determined in paragraph of this section by the percentage of the total outstanding principal amount of the borrower's eligible loans that are Direct Loans; (C) The calculated amount under paragraph or of this section is less than $5.00, in which case the borrower's payment is $0.00; or (D) The calculated amount under paragraph or of this section is equal to or greater than $5.00 but less than $10.00, in which case the borrower's payment is $10.00. if the borrower's payment amount is not sufficient to pay the accrued interest on the borrower's loan?? (A) Except as provided in paragraph of this section, for a Direct Subsidized ieanngg or the subsidized portion of a Direct Consolidation Loan, the Secretary does not charge the borrower the remaining accrued interest for a period not to exceed three consecutive years from the established repayment period start date on that loan under the PayAsxeeEarnrepayment?REPAYE plan. Following liaatien?Eeanthat (B) For a Direct Unsubsidized Loan. a Direct PLUS Loan made to a graduate or professional student, or the unsubsidized portion of a Direct Consolidation Loan. or for a Direct Subsidized Loan or the subsidized portion of a Direct Consolidation Loan for which the borrower has become responsible for accruing interest in accordance with the Secretary charges the borrower 50 percent of the remaining accrued interest. (C) The three-year period described in paragraph of this section-- (1) Does not include any period during wit-hwhich the borrower receives an economic hardship deferment: (2) includes any prior period of repayment under the income-based repayment plan or the Pay As You Earn rRepavment plan: and (3) For a Direct Consolidation Loan, includes any period in which the underlying loans were repaid under the income?based repayment plan or the Pay As Your Earn rRepayment lean. Except as provided in paragraph of this section, accrued interest is capitalized? (1) When the Secretary aberrewer?is determinesd te?ne?lengephavethat a borrower does not have a partial financial hardship; or (2) At the time a borrowershoeses-te leaves the?RayAsA?eu?Earn REPAYE DRAFT Proposed Modifications to Existing Regulations 04/30/2015 The amount of accrued interest capitalized under paragraph 1) of this section is limited to 10 percent of the original principal balance at the time the borrower entered repayment under the RayAsA?eu?Earn?repaymentREPAYE plan. (2) After the amount of accrued interest reaches the limit described in paragraph of this section, interest continues to accrue, but is not capitalized while the borrower remains on the Earn?repaymeatREPAYE plan; if the borrower's payment amount is not sufficient to pay any of the principal due, the payment of that principal is postponed until the borrower eheases?ta-leaves the repayment- plan or ne-lenge?he Secretary determines the borrower does not havebasa partial financial hardshipborrower who no lon er wishes to rebav under the REPAYE plan may chanqe to a different repayment plan in accordance with (3) Payment application and prepayment. The Secretary applies any payment made under the Pay?As repayment?plan in the following order: (A) Accrued interest. (B) Collection costs. (C) Late charges. (D) Loan principal. (ii) The borrower may prepay all or part of a loan at any time without penalty, as provided under If the prepayment amount equals or exceeds a payment amount of $10.00 or more under the repayment schedule established for the loan, the Secretary applies the prepayment consistent with the requirements of (iv) If the prepayment amount exceeds a payment amount of $0.00 under the repayment schedule established for the loan, the Secretary applies the prepayment consistent with the requirements of paragraph {-a?g?SXi) of this section. reealealatien? 10 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 Eligibility documentation, veri?cation, and notifications. For the year the borrower initiaitv seiects the REPAYE plan and for each subsequent year that the borrower remains on the pies, lithe Secretary determines berroWet?s payment amount for that year. For each subsequent year that the borrower remains on the plan, the Secretary also determines whether the borrower has a partial financiai hardship.To make this-these determinations, the Secretary requires the borrower to provide documentation, acceptable to the Secretary, of the borrower's AGI. (B) If the borrower's AGI is not available, or if the Secretary believes that the borrower's reported AGI does not reasonably reflect the borrower's current income, the borrower must provide other documentation to verify income. (C) Unless otherwise directed by the Secretary, Theth_e borrower must annually certify the borrower's family size. If the borrower fails to certify family size, the Secretary assumes a family size of one for that year (ii) After making the determinations described it?: sereoraph {s?t4tiitm} of this section for the initial year that the borrower seiests the pies and for each subseeuent year that the borrower remains on the the Secretary sends the borrower a written notification that provides the borrower with? (A) The borrower's scheduled payment amount, as calculated under paragraph of this section, and the time period during which this scheduled payment amount will apply (annual payment period); (B) Information about the requirement for the borrower to annually provide the information described in paragraph of this section, if the borrower chooses to remain on the Pay?As??eu repayment?plan after the initial year on the plan, and an explanation that the borrower will be noti?ed in advance of the date by which the Secretary must receive this information; (C) An explanation of the consequences, as described in paragraphs and of this section, if the borrower does not provide the required information; and (D) Information about the borrower's option to request, at any time during the borrower's current annual payment period, that the Secretary recalculate the borrower's payment amount if the borrower's financial circumstances have changed and the income amount that was used to calculate the borrower's current payment no longer reflects the borrower's current income. If the Secretary recalculates the borrower's payment amount based on the borrower's request, the Secretary sends the borrower a written notification that includes the information described in paragraphs through of this section. For each subsequent year that a borrower on the repayment?plan, the Secretary notifies the borrower in writing of the requirements in paragraph of this section no later than 60 days and no earlier than 90 days prior to the date specified in paragraph of this section. The notification provides the borrower 11 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (A) The date, no earlier than 35 days before the end of the borrower's annual payment period, by which the Secretary must receive all of the documentation described in paragraph of this section (annual deadline); and (B) The consequences if the Secretary does not receive the information within 10 days following the annual deadline specified in the notice, described in paragraphs and of this section. (iv) Each time the Secretary makes a determination that a borrower ne?longer?hasdoes not have a partial financial hardship for a subsequent year that the borrower wishes to remain on the plan, the Secretary sends the borrower a written notification that provides-the~borrower-withm interest will be capitalized in accordance with paragraph of this section-seed; (vim If a borrower who is currently repaying under another repayment plan selects the Pa+As?eu?Eam REPAYE repayment?plan but does not provide the documentation described in paragraphs or of this section, borrower remains on his or her current repayment plan. I . - .I -- Except as provided in paraqraph of this sectioLif a borrower who is currently repaying under the repayment?plan remains on the plan for a subsequent year but the Secretary does not receive the documentation described in paragraphs ands}; of this section within 10 days of the specified annual deadline, the Secretary removes the borrower from the REPAYE plan and places the borrower on an alternative repayment plan under which the borrower?s required payment is the amount necessary to repay the borrower?s loan in full within the earlier of? . (A) 40?Ten years from the date the borrower beqins repayment under the alternative repayment plan;or= 12 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (B) The endinq date of the 20? or 25syear period as described in paraqraphs and of this sec?on. (vii) it the Secretary places the borrower on an alternative repayment plan in accordance with paragraph of this section. the Secretary sends the borrower a written notification that?informian the W2: (A) The borrower has been placed on an alternative repayment plan; The borrower's mantrath paymant amount has been recalculated in accordance with paraqraph of this section: (C) The borrower may chanqe to another repayment plan in accordance with ?685.210( (D) A borrower who has been removed from the REPAYE plan in accordance with paraqraph of this section or chances to another repayment plan in accordance with paragraphs (c)(2iivi) or of this section may return to the REPAYE plan if he or she provides the documentation, as described in paraqraphs or B) of this section. necessary for the Secretary to calculate the borrower's current REPAYE plan payment amount and the amount the borrower would have been required to pay under the REPAYE plan durinq the period when the borrower was on the alternative repayment plan or any other repayment plan; E) if the Secretary determines that the total amount of the payments the borrower was required to make while on the alternative repayment plan or any other repayment plan are less than the total amount the borrower would have been required to make under the REPAYE plan durinq that period, the Secretary will adiust the borrower?s REPAYE plan payment amount to ensure that the difference between the two amounts is paid in full bythe end of the 20- or 25-year period described in paraqaphs and of this section: (F) if the borrower returns to the REPAYE plan or chances to the Pay As Your Earn Repayment plan under the income-continqent repayment plan under or the theincome-based repayment plan under $685,221. any payments that the borrower made under the alternative repayment plan after the borrower was removed from the REPAYE plan will count towards forqiveness under the REPAYE plan or the other repayment plans under or $685,221; and (G) Payments made under the alternative repayment plan described in paraqraph of this section will not countd towards Public Service Loan Forqiveness under ?685.219. The Secretary does not take the action described in paraqraph of this section if the Secretary receives the documentation described in paraqraphs andor of this section more than 10 days after the specified annual deadline, but is able to determine the borrower?s new payment amount before the end of the borrower?s current annual payment period. W?zg-If the Secretary receives the documentation described in paragraphs gran-d of this section within 10 days of the specified annual deadline? (A) The Secretary determines the borrower's new scheduled payment amount and maintains the borrower's current scheduled payment amount until the new scheduled payment amount is determined. (1) if the new payment amount is less than the borrower?s previously calculated Ray?Asxeu?Eam REPAYE repayment?plan payment amount, and the borrower made payments at the previously 13 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 calculated amount after the end of the most recent annual payment period, the Secretary makes the appropriate adjustment to the borrower's account. Notwithstanding the requirements of ?685.21 unless the borrower requests otherwise, the Secretary applies the excess payment amounts made after the end of the most recent annual payment period in accordance with the requirements of (2) if the new payment amount is equal to or greater than the borrower's previously calculated repayment?plan payment amount, and the borrower made payments at the previously calculated payment amount after the end of the most recent annual payment period, the Secretary does not make any adjustment to the borrower's account. (3) Any payments that the borrower continued to make at the previously calculated payment amount after the end of the prior annual payment period and before the new payment amount is calculated are considered to be qualifying payments for purposes of ?685.219, provided that the payments otherwise meet the requirements described in (B) The new annual payment period begins on the day after the end of the most recent annual payment penod. (65) Loan forgiveness. A borrower who meets the requirements specified in paragraph of this section may qualify for loan forgiveness after 20 or 25 years, as determined in accordance with paragraph of this section. (liliA) A borrower Wi?i?j?? .. . . - loans being repaidunder the -include only loans the borrower received as an undergraduate student or a consolidation loan that repaid only loans theborrower received as an undergraduate 'stUnt may qualify for forgiveness after 20 years. loans beinqrepaid under the plan was?mere . - include aioan the borrower receivedxes a loan that repaid a loan received as agraduate or . 3-. - I '4 Secretary cancels any remaining outstanding balance of principal and accrued interest on a borrower?s Direct Loans that a . DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (A) The borrower has made the equivalent of 240 or 300, as applicable, qualifyinq payments as defined in paraqraph of this section; and (B) Twenty or 25 years, as applicable, have elapsed, beqinninq on the date determined in accordance with paraqraph of this section. (iv) For the purpose of paraqraph of this section, a qualifyinq payment is? (A) WA payments under eF?ai?zi?l??Gf-tms?See??en" the REPAYE lan, including a payment amount of $0.00, as provided under paragraph of this sectionr; (axe; A payment under the Pay As You Earn rRepayment plan described in paraqraph of this section, the income-contingent repayment plan described in paraqraph of this section. or the income-based-repayment plan described in $685.221Lincludinq a payment amount of A payment made under-- (1) The Direct Loan standard repayment plan described in (2) Ihe alternative repayment pian described in paragraphs WW5 and (vii) of this section prior to chanqinq to a repayment plan described under ?685209 or ?685.221;; (3) menthweayment?ueder?aAny other Direct Loan repayment plan, if the amount of the payment was not less than the amount required under the Direct Loan standard repayment plan described in - gig-MED) A month durinq which the borrower not required to make a payment due to receiving an economic hardship deferment on his or her eligible Direct Loans. DRAFT Proposed Modifications to Existing Regulations 04/30/2015 saggy) For a borrower who qualifies for the repaymentplan, the beginning date for the 20?year or 25-year repayment period is? (A) If the borrower made payments under the Pay As You Earn Repayment pies in paragraph at this sectien, the income-contingent repayment plan described in paragraph of this section, or the income-based repayment plan described in ?685.221, the earliest date the borrower made a payment on the loan under one of those or (B) If the borrower did not make payments under the Pay As Yea Earn rReaayt?seat star: described is paradz?aph of this section, the income?contingent repayment plan described in paragraph of this section,_ or the income-based repayment plan described in ?685.221? (1) For a borrower who has an eligible Direct Consolidation Loan, the date the borrower made a guali?ing payment the consolidation loan, Fepayment?planr; line-beginning (2) For a borrower who has one or more other eligible Direct Loans, the date the borrower made a qualifying payment that loan, before the date the borrower qualified forthe REPAYE planrborrower who did not make a guali?ing payment deferment?on the loan under paragraph or of this section, the date the borrower made a payment on the loan under the repayment?plan; (4) If the borrower consolidates his or her eligible loans, the date the borrower made a gualifying payment on the Direct Consolidation or (5) If the borrower did not make a qualifying payment on the loan under paragraph or of this section, the date the borrower made a payment on the loan under the repayment?plan. Any payments made on a defaulted loan are not madeundeFa?qualifying payments and are not counted toward the 20-year or 25-year forgiveness period. When the Secretary determines that a borrower has satisfied the loan forgiveness requirements under paragraph of this section on an eligible loan, the Secretary cancels the outstanding balance and accrued interest on that loan. No later than six months prior to the anticipated date that the borrower will meet the forgiveness requirements, the Secretary sends the borrower a written notice that includes? (1) An explanation that the borrower is approaching the date that he or she is expected to meet the requirements to receive loan forgiveness; (2) A reminder that the borrower must continue to make the borrower's scheduled payments; and 16 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (3) General information on the current treatment of the forgiveness amount for tax purposes, and instructions for the borrower to contact the Internal Revenue Service for more information. (B) The Secretary determines when a borrower has met the loan forgiveness requirements in paragraph of this section and does not require the borrower to submit a request for loan forgiveness. (C) After determining that a borrower has satisfied the loan forgiveness requirements, the Secretary? (1 Notifies the borrower that the borrower's obligation on the loans is satisfied; (2) Provides the borrower with the information described in paragraph of this section; and (3) Returns to the sender any payment received on a loan after loan forgiveness has been granted. 4. ?685.221 Income-based repayment plan. r. t] Terms of the repayment plan. (1) *1 (3) If the borrower's payment amount is not sufficient to pay the accrued interest on the borrower's Direct Subsidized loan or the subsidized portion of a Direct Consolidation Loan, the Secretary does not charge the borrower the remaining accrued interest for a period not to exceed three consecutive years from the established repayment period start date on that loan under the income-based repayment plan. Any period during which the Secretary has previously not charged the borrower accrued interest on an eligible loan under the Pay As You Earn repayment plan or the Revised PaiLAs You Earn repayment mcounts toward the maximum three years of subsidy a borrower is eligible to receive under the income?based repayment plan. On a Direct Consolidation Loan that repays loans on which the Secretary has not charged the borrower accrued interest, the three-year period includes the period for which the Secretary did not charge the borrower accrued interest on the underlying loans. This three-year period does not include any period during which the borrower receives an economic hardship deferment. [driest] Loan forgiveness. 1) To qualify for loan forgiveness after 25 years or, for a new borrower, after 20 years, a borrower must have participated in the income-based repayment plan and satisfied at least one of the following conditions during the applicable loan forgiveness period: Made payments under ath_e Direct Loan income?contingent repayment plan, the Pay As You Earn repayment plan, or the Revised Pay As You Earn repayment plan, including a calculated payment amount of $0.00. (vi) Made payments under the alternative repayment plan described in and (vii) prior to chanqinq to a repayment plan described under {3685.209 or ?685.221; 17 DRAFT Proposed Modifications to Existing Regulations 04/30/2015 (vii) Received an economic hardship deferment on eligible Direct Loans. (3) For a borrower who qualifies for the income?based repayment plan, the beginning date for the applicable loan forgiveness period is? if the borrower made payments under the income?contingent repayment plan. the Pay As You Earn repayment plan. or the Revised Pay As You Earn repayment plan, the date the borrower made a payment on the loan under that plan at any time after July 1, 1994; or (ii) If the borrower did not make payments under Wow of the repavment plans described in paragraph of this section" ?685.219 Public Service Loan Forgiveness Program. *1 Borrower eligibility. (1) A borrower may obtain loan forgiveness under this program if he or she?- P, Makes the required 120 payments under one or more of the following repayment plans? (A) Except for a parent PLUS borrower, an income-based repayment plan, as determined in accordance with ?685.221; (B) Except for a parent PLUS borrower, an income-contingent repayment plan, as determined in accordance with ?685.209; (C) A standard repayment plan, as determined in accordance with or (D) Except ?for an alternative repayment plan. Agni! other. repayment plan if the payment amount paid is not less than what would have been paid under the Direct Loan standard repayment plan described in 18