To: U.S. Department of Education; Negotiated Rulemaking Committee

From: Lane Thompson, Negotiator for State Officials, including State higher education 

executive officers, State authorizing agencies, and State regulators of institutions of higher 

education; Sherrie Gammage, Negotiator for Student Loan Borrowers Who Attended Four-Year 

Programs; Richard Haase, Negotiator for Student Loan Borrowers Who Attended Graduate 

Programs

Date: November 14, 2023

RE: Redlines to Interest Accrual Text

Background

The experience of borrowers facing runaway balances is incredibly common1 and has affected 

more and more borrowers over time.2 The design structure of previous versions of incomedriven repayment plans implicitly treated these snowballing balances as insignificant, a simple 

technicality that will eventually disappear as borrowers complete the 20 or 25-year repayment 

period required to receive any forgiveness under their respective IDR plans.3

The problem of interest accrual was further exacerbated by policy choices made by previous 

Administrations which caused interest to capitalize in certain circumstances, such as when 

borrowers were put into forbearance, changed repayment plans, or missed their annual 

recertification deadline.4

In its first issue paper, the Department has correctly identified the problem that borrowers have 

seen their balances grow due to the accrual of unpaid interest such that many borrowers now 

have overall balances higher than what they originally borrowed. In addition, many borrowers 

have made significant payments to loans and yet have not seen their loan balances diminish. 

For example, according to one study, the typical black borrower still owes approximately 90 

percent of the original principal twenty years after taking on the debt. Many borrowers have paid 

at least what they borrowed---and sometimes more---without seeing a reduction in their 

balance.

Although the Department has made significant improvements to the treatment of interest by 

ending interest capitalization when allowed by statute, and waiving unpaid interest in the SAVE 

plan, those changes were not made retroactively.

Returning borrowers to their original balance irrespective of how much the borrower has paid 

fails to meet the gravity of the problem. As the Department has stated that it is unable to 

retroactively credit borrowers accounts to reflect those changes in policy, we instead propose 

that the Department take all amounts that borrowers have paid towards interest and apply those 

payments towards the borrowers original balance.

1 https://www.pewtrusts.org/-/media/assets/2019/10/the-long-journey-through-student-loan-repayment.pdf 2 https://www.jainfamilyinstitute.org/assets/student-debt-and-young-america-jfi-feb-2021.pdf 3 https://protectborrowers.org/idr-aimed-to-make-federal-student-loans-affordable-it-made-them-evenmore-of-a-debt-trap/ 4 https://protectborrowers.org/driving-into-a-dead-end-why-idr-has-failed-millions-with-decades-old-debts/
TEXT REDLINE

(b) Current balance exceeds the original principal balance. The Secretary may waive [all or a 

portion of ] the amount by which a borrower’s total outstanding balance exceeds the original 

principal balance of the loan, including if the loan is a Federal Consolidation Loan or a Direct 

Consolidation Loan, the total original principal balance of all loans repaid by such loan, if—

(i) The loan was in repayment for at least XX months by no later than July 1, 2025.; and

[(ii) BORROWER ELIGIBILITY REQUIREMENTS].

(_) Borrower repaid more than would be owed under the Standard Ten-Year Plan. The 

Secretary may waive [up to] the entire outstanding balance:

(i) of a loan where the Secretary determines that a borrower has made payments on 

such a loan of an amount equal to or greater than to total of:

(A) the original principal balance of the loan;

(B) any accrued interest charged on a loan during an “in school” or a grace 

period; and

(C) the total accrued interest a borrower would have been charged over a period 

of 120 consecutive months after exiting a grace period.

(ii) of a Federal Consolidation Loan or a Direct Consolidation Loan, if the Secretary 

determines that a borrower has made monthly payments equal to or greater of the 

amount required under paragraph (i) for all loans repaid by such loan.