**Pay As You Earn (PAYE) Extension**

**Negotiated Rulemaking Committee Meetings**

Opening Remarks of

Jeff Appel, Deputy Under Secretary,

U.S. Department of Education

February 24, 2015

9 a.m.

Good morning and thank you for being here. I am Jeff Appel, Deputy Under Secretary of the U.S. Department of Education, and I am pleased to welcome you to the Department and to the first of three negotiating sessions.  

As you prepare to consider the important issues before you, I would like to take a few moments to underscore why your efforts are so important not only to student loan borrowers, but to the nation.  

A college education remains the most important investment that Americans can make.  Unfortunately, for many low- and middle-income families, college is slipping out of reach. Over the past three decades, the average tuition at a public four-year college has more than tripled, while a typical family's income has increased only modestly. More students than ever are borrowing to pay for college; and they are borrowing more. Today, 71 percent of those earning a bachelor's degree graduate with debt, averaging $29,400.  Most students are able to repay their loans.  But, many borrowers feel burdened by debt, especially as they seek to start a family, buy a home, launch a business, or save for retirement.

Over the past several years, this Administration has worked to ensure that college remains affordable and that student debt is manageable. It has raised the maximum Pell Grant award by nearly $1,000, created the American Opportunity Tax Credit, and extended access to affordable, income-driven loan repayment plans. These repayment plans, like the Pay As You Earn plan that caps a Federal student loan borrower's payments at 10 percent of discretionary income for 20 years, can be an effective tool to help individuals afford their student loan debt and avoid the consequences of delinquency and default. For students that need to borrow, Pay As You Earn provides an important assurance that student loan debt will remain manageable.  Because the plan is based in part on a borrower’s income after leaving school, it shares with students the risk of taking on debt to invest in higher education. 

While this Administration has made significant strides in expanding affordable repayment options, and raising awareness of these options, more needs to be done. That is why last June President Obama directed the Secretary of Education to propose regulations that would allow millions more direct student loan borrowers the opportunity to cap their loan payments at 10 percent of their income, and do so in a way that targets this option to those borrowers who would otherwise struggle to repay their loans.  As you know, Pay As You Earn is not available to students with older loans (those who borrowed before October 2007) or those who have not borrowed since October 2011.  This committee is tasked with making this new plan available to these borrowers, thereby ensuring that all Direct Loan student borrowers can cap their payments at 10 percent of their discretionary income, regardless of when they borrowed.  In addition, we will seek to include new features to better target this plan to struggling borrowers.    

The Administration has also worked to ensure our nation’s servicemembers are not unduly burdened when seeking to take advantage of the interest rate benefit to which they are entitled under the Servicemembers Civil Relief Act (SCRA).  To this end, the Department’s Direct Loan Servicers have implemented the use of the Department of Defense’s (DOD) Defense Manpower Data Center (DMDC) Database to proactively identify all eligible active duty service members and grant them the reduced interest rate benefit.     Borrowers are no longer required to submit a written request and a copy of their military orders to establish eligibility.   FFEL program loan holders are currently authorized to use this same approach, and we understand they are actively doing so.  This regulatory effort seeks to incorporate this streamlined approach to into the FFEL program regulations. 

I know everyone here today agrees these two issues—(1) developing new regulations to implement President Obama’s announced extension of the Pay As You Earn repayment plan, and (2) establishing procedures for holders of Federal Family Education Loans (FFEL loans) to use the DOD’s DMDC database to identify U.S. military servicemembers eligible for a lower interest rate on their FFEL Program loans under section 527 of the SCRA—are indeed very important. 

Those of you around the negotiating table represent years of experience and extraordinary dedication to postsecondary access and affordability, including the manageable repayment of federal student loans. The work you will undertake throughout these negotiated rulemaking sessions is critical to the development of sound regulations that will further these goals.  Thank you for your willingness to share your time and expertise with us.

I look forward to a productive discussion of the issues.  On behalf of Secretary Duncan and Under Secretary Mitchell, thank you for participating in this important rulemaking effort.

1