The Department of Education's Notice of Proposed Rulemaking on Improving Income-Driven Repayment for the Direct Loan Program: Frequently Asked Questions. CRS Report R47418, Version 3

Income-driven repayment (IDR) plans are a subset of student loan repayment plans that cap a borrower's monthly payment at a percentage of their discretionary income, which is defined as a portion of a borrower's adjusted gross income (AGI) that exceeds a specified multiple of the federal poverty line (FPL) for the borrower's family size. A borrower may be in negative amortization under an IDR plan, which means that their monthly payment can be less than the interest that accrues in a given month, and the accumulation of unpaid interest may lead to an increase in their loan balance. Any loan balance that remains outstanding after the borrower has made qualifying payments according to an IDR plan for a maximum repayment period is to be forgiven. Over the last nearly 30 years, Congress and the Department of Education (ED) have created the following existing IDR plans: the Income-Contingent Repayment (ICR) plan, two Income-Based Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan. In January 2023, ED published a Notice of Proposed Rulemaking (NPRM) to make a number of substantial amendments to the federal student loan IDR plans. This report discusses the most frequently asked questions related to the proposed rules in the following areas: (1) background on IDR plans; (2) changes specific to the REPAYE repayment plan such as to borrower eligibility, monthly payments, interest benefits, and the maximum repayment period; (3) changes applicable to all IDR plans; other provisions related to delinquent and defaulted borrowers; and (4) the estimated cost of the proposed rules.