Republican Lawmakers Target Biden’s Student Loan Repayment Overhaul

Congressional Republicans are stepping up criticism of President Biden’s overhaul of income-driven repayment for federal student loan borrowers. They’re urging the administration to “withdraw” the proposal.

Here’s the latest.

Biden’s overhaul of student loan repayment: The details

Last month, the Biden administration announced a complete overhaul of the Revised Pay As You Earn (REPAYE) plan. REPAYE is one of several existing income-driven repayment (IDR) plans that allow borrowers to have monthly payments based on their income and family size, with eventual loan forgiveness after 20 or 25 years if their balance has not been paid in full.

The changes to REPAYE would be significant for many:

• Borrowers with only undergraduate student loans could have their monthly payments cut in half under the proposal.
• Undergraduate borrowers with starting balances of under $20,000 could receive loan forgiveness in less than 20 years. 
• Graduate school borrowers could see a reduction in their monthly payments, particularly if they have undergraduate loans as well, due to an increase in the poverty exemption limit and a weighted-average repayment formula. 
• Married borrowers would be able to file taxes separately to exclude spousal income, just like under the other three major IDR plans (Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn). 

Additional benefits include certain periods of deferment and forbearance counting towards a borrower’s student loan forgiveness term. Interest would no longer accrue in excess of a borrower’s monthly REPAYE payments, eliminating costly interest accrual and capitalization events that can result in massive balance increases over time.

Congressional republicans criticize Biden’s student loan plan

Last Friday, February 10, 2023, a coalition of 35 GOP senators and 32 GOP House members sent a letter to Education Secretary Miguel Cardona, urging him not to move forward with the REPAYE overhaul.

“We encourage you to withdraw the latest radical proposal put forth by your Department and work with Congress on meaningful and sustainable student loan reforms,” wrote the group of lawmakers. 

“This proposed regulation…would turn a safety-net for low-income federal student loan borrowers into an unsustainable transfer of wealth from hardworking taxpayers to college-educated individuals,” they wrote. “Telling student loan borrowers that they can expect to pay back only a fraction of what they owe undercuts the legislative intent of the Direct Loan program and the basic social contract of borrowing.”

The lawmakers attacked the reductions in monthly payments and the allowance of some deferment and forbearance periods to count towards loan forgiveness. They also targeted the interest benefits of the REPAYE overhaul, arguing that federal law does not allow for the limiting of interest accrual, only interest capitalization. 

“Simply put, the proposed rule will exacerbate the problems of rising college costs and excessive borrowing. Policy experts agree that the vast majority of students will never fully repay their loans under this proposal. Borrowing for college will become the default for every household, including for those who can afford to pay and otherwise would have paid out-of-pocket. This proposal is reckless, fiscally irresponsible, and blatantly illegal and, as such, it should be rescinded,” they concluded. 

Related: Latest Updates on 6 Key Student Loan Forgiveness Initiatives

Legality of Biden’s REPAYE overhaul

While the Republican lawmakers argued that President Biden’s reforms to IDR are illegal, the administration may be on stronger legal footing than it is for Biden’s one-time student loan forgiveness plan, which is going before the Supreme Court later this month. 

Unlike that initiative, the administration is overhauling the REPAYE plan through the more routine regulatory overhaul process allowed under federal statute, including required notice and comment periods, rather than relying on emergency regulations to bypass the normal regulatory procedure. That emergency regulatory procedure is at the heart of one of the two legal challenges that have blocked Biden’s one-time debt relief plan. 

Notably, existing federal statutes provide fairly broad authority for the Education Department to draft regulations governing the parameters of income-driven repayment, including establishing payment formulas and the length of a repayment term. Existing federal statutes and regulations allow for interest to be suspended during certain periods when a borrower is in an IDR plan.

Still, the Republican lawmakers are arguing that Biden’s proposal goes beyond what Congress authorized when it passed legislation establishing IDR programs. 

Advocacy organizations for student loan borrowers have largely been supportive of the administration’s efforts to reform IDR, although some have criticized the REPAYE overhaul for not going far enough in reducing monthly payments or the length of the repayment term and for completely excluding Parent PLUS borrowers from relief. 

Can lawmakers stop Biden's plan?

Republican lawmakers don’t have a clear path to stopping Biden’s plan. While Republicans won narrow control of the House following November’s elections, Democrats retained control of the Senate. Any new legislation must be passed by both houses of Congress and then signed by President Biden. While nearly 70 Republican lawmakers signed on to Friday’s letter, it did not represent a majority of either the Senate or the House of Representatives. 

House Republicans could explore a formal legal challenge to Biden’s proposal, although it is unclear if that would be viable or if it is under serious consideration at this time. 

Next steps for REPAYE overhaul

The proposed changes to REPAYE are not final, and they are not yet in effect. A public comment period ended on Friday, February 10, 2023, and now the Education Department must review and consider the submitted comments. Then, the Department will issue the final proposed regulations. The changes would go into effect sometime after that. 

Officials have not provided a specific timeline for borrowers, however, so it is unclear when the changes will be effective. The new rules will almost certainly not be in place by this summer, which is when Biden’s most recent extension of the student loan payment pause is set to end. 

Due to an ongoing budget crisis at the Office of Federal Student Aid after being flat-funded by Congress in the latest omnibus budget bill, it is possible that the changes won’t go live until sometime in 2024.