The Department of Treasury (Treasury) and Department of Education (ED) issued a Memorandum of Understanding (MOU) on January 17, 2017, which establishes an agreement between the two agencies that will allow Treasury to electronically share tax information with ED as part of the annual recertification process for borrowers enrolled in income-driven repayment (IDR) plans. Currently, student loan borrowers enrolled in IDR plans must submit their income annually to the Office of Federal Student Aid (FSA) in order to stay enrolled in the plan, and failure to annually certify income results in a borrower being placed in the Standard repayment plan, which typically requires a higher monthly payment. According to this new MOU, a borrower would provide consent to the Internal Revenue Service to share certain information with FSA and their loan servicers for a period of at least five years.
This agreement between Treasury and ED is similar to Congresswoman Suzanne Bonamici (D-OR) and Congressman Ryan Costello’s (R-PA) bipartisan SIMPLE Act, which was introduced in the last Congress and was supported by AccessLex Institute for the way it would, in part, streamline the process for borrowers to continue their participation in IDR plans by automatically recertifying borrowers’ income. ED data indicates that nearly 60 percent of borrowers who were required to submit annual recertification forms failed to do so on time, resulting in 30 percent of these borrowers going into forbearance or deferment. One of the goals of automatic income recertification is to reduce the percentage of borrowers going into forbearance or deferment for simply failing to recertify their income.