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[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 3695-3702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00724]

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DEPARTMENT OF EDUCATION

34 CFR Part 685

[Docket ID ED-2024-OPE-0135]
RIN 1840-AD97

Income-Contingent Repayment Plan Options

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.

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SUMMARY: The Department of Education (Department) adopts as final, 
without changes, the interim final rule published in the Federal 
Register on November 15, 2024. This final rule amends the regulations 
governing income-contingent repayment plans available to Federal 
student loan borrowers to satisfy the Department's statutory obligation 
under the Higher Education Act of 1965, as amended, (HEA) to offer 
borrowers access to an income-contingent repayment plan. The scope of 
this rule is narrow. It revises the last date for most borrowers to 
enroll in the Income-Contingent Repayment or Pay As You Earn plans from 
July 1,

[[Page 3696]]

2024, to July 1, 2027. Changing the eligibility restrictions that went 
into effect on July 1, 2024, to July 1, 2027, allows the Department to 
meet its statutory obligations while it undertakes the necessary 
administrative changes to make its repayment plans compliant with the 
terms of an injunction pending appeal from the U.S. Court of Appeals 
for the Eighth Circuit (Eighth Circuit).

DATES: 
    Effective date: These regulations are effective on July 1, 2026.
    Implementation date: For the implementation date of these 
regulatory changes, see the Implementation Date of These Regulations 
section of this document.

FOR FURTHER INFORMATION CONTACT: For further information contact Tamy 
Abernathy, U.S. Department of Education, Office of Postsecondary 
Education, 400 Maryland Avenue SW, 5th Floor, Washington, DC 20202. 
Telephone: (202) 245-4595. Email: [email protected].
    If you are deaf, hard of hearing, or have a speech disability and 
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION: In this final rule, the Department uses the 
term ``income-contingent repayment plans'' to include the original 
Income-Contingent Repayment (ICR) plan established by the Department in 
1994 as well as the Pay As You Earn (PAYE), Revised Pay As You Earn 
(REPAYE), and the Saving on a Valuable Education (SAVE) plans.
    Implementation Date of These Regulations: These regulations are 
effective on July 1, 2026. Section 482(c) of the HEA requires that 
regulations affecting programs under title IV of the HEA be published 
in final form by November 1, prior to the start of the award year (July 
1) to which they apply. However, that section also permits the 
Secretary to designate any regulation as one that an entity subject to 
the regulations may choose to implement earlier, as well as the 
conditions for early implementation.
    As described in the interim final rule (IFR) (89 FR 90221), the 
Secretary exercised the authority under section 482(c) of the HEA to 
designate the regulatory changes to 34 CFR part 685 included in the IFR 
(and reaffirmed in this document) for early implementation on December 
16, 2024, for the reasons set forth in the IFR and Background and Need 
for Regulatory Action sections of this document.

Executive Summary

Purpose of This Regulatory Action

    The regulations in the November 15, 2024, interim final rule enact 
a time-limited fix to make certain the Department meets its obligations 
under section 455(d)(1) of the HEA. That section requires the Secretary 
of Education (Secretary) to offer Federal Direct Loan borrowers a 
variety of student loan repayment plans, including an ``income-
contingent repayment plan,'' under which a borrower makes payments 
``based on the borrower's income'' for ``an extended period of time 
prescribed by the Secretary, not to exceed 25 years.'' \1\ On November 
15, 2024, the Department published an IFR to satisfy the Department's 
statutory obligation under the HEA to offer borrowers an income-
contingent repayment plan.\2\ This final rule and the IFR that preceded 
it allow the Department to comply with this requirement. The rule 
titled ``Improving Income Driven Repayment for the William D. Ford 
Federal Direct Loan Program and the Federal Family Education Loan 
(FFEL) Program'' that took effect on July 1, 2024 (income-driven 
repayment [IDR] final rule), limited new enrollments in the PAYE and 
ICR plans for student borrowers so that they would have one clear 
option under this authority--the Saving on a Valuable Education (SAVE) 
plan (88 FR 43820). However, legal challenges to the SAVE plan resulted 
in an injunction pending appeal from the Eighth Circuit that prevents 
the Department from implementing significant aspects of the SAVE 
plan.\3\ The Department cannot immediately execute the operational work 
needed to conform the SAVE plan to the court's Eighth Circuit's 
injunction pending appeal, so we have placed borrowers who had enrolled 
in the SAVE plan in a forbearance to avoid violating that injunction. 
With SAVE not available and other ICR plans closed to new enrollments, 
the Department was therefore not in compliance with the statutory 
requirement to offer an income-contingent repayment plan to borrowers.
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    \1\ HEA section 455(d)(1)(D) (20 U.S.C. 1087e(d)(1)(D)).
    \2\ 89 FR 90221 (November 15, 2024).
    \3\ Specifically, in the Missouri case, the U.S. District Court 
for the Eastern District of Missouri entered a preliminary 
injunction on June 24, 2024, enjoining the shortened time to 
forgiveness that had been offered by the SAVE Plan. Missouri v. 
Biden, No. 4:24-CV-00520-JAR, 2024 WL 3104514, at *1 (E.D. Mo. June 
24, 2024) (preliminary injunction). The challengers appealed and on 
July 18, 2024, the Eighth Circuit stayed the entire rule pending 
appeal, Missouri v. Biden, No. 24-2332, 2024 WL 3462265, at *1 (8th 
Cir. July 18, 2024), and then on August 9, 2024, the Eighth Circuit 
entered an injunction pending appeal that replaced the previously 
entered stay, Missouri v. Biden, 112 F.4th 531 (8th Cir. 2024) (per 
curiam) (injunction pending appeal). In the Alaska case, the U.S. 
District Court for the District of Kansas entered a preliminary 
injunction on June 24, 2024. See Alaska v. Cardona, No. 24-1057-DDC-
ADM, 2024 WL 3104578, at *1 (D. Kan. June 24, 2024). Thereafter, the 
Tenth Circuit Court of Appeals stayed the preliminary injunction 
pending appeal. See Alaska v. Cardona, No. 20-3089, Order Staying 
Prelim. Inj. (10th Cir. June 30, 2024). That Tenth Circuit appeal 
has been held in abeyance pending the outcome of the Eighth Circuit 
proceedings.
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    The IFR announced the reopening of the PAYE and ICR plans to new 
enrollments until July 1, 2027. This reopening allows the Department to 
offer borrowers an income-contingent repayment option as required under 
the HEA.

Summary of the Major Provisions of This Regulatory Action

    This final rule adopts without change the provisions in the IFR, 
which--
     Adjust the date after which borrowers cannot begin to 
repay a loan under the PAYE plan unless they are already enrolled in 
the plan as provided in Sec.  685.209(c)(4)(iv) from July 1, 2024, to 
July 1, 2027.
     Revise the date after which borrowers cannot begin to 
repay a loan under the ICR plan unless they are already enrolled in 
that plan or have a consolidation loan that repaid a Parent PLUS loan 
as provided in Sec.  685.209(c)(5)(i)(B) from July 1, 2024, to July 1, 
2027.

Costs and Benefits

    As further detailed in the Regulatory Impact Analysis (RIA), this 
final rule does not create significant budgetary costs for the 
Department. For existing borrowers, the Department already assumes in 
our budget baseline that borrowers who would receive more benefit from 
being enrolled in PAYE or ICR rather than SAVE over the long term are 
already in those plans. The budget baseline also assumes that borrowers 
seeking Public Service Loan Forgiveness (PSLF) would continue to make 
payments. So, a borrower who leaves SAVE to join PAYE or ICR so they 
can qualify for forgiveness under PSLF does not generate additional 
costs. The final rule provides some non-monetary benefits to the 
Department by allowing it to comply with requirements in the HEA. For 
borrowers, the final rule provides benefits to those who now enroll in 
PAYE or ICR and make payments that allow them to reach forgiveness 
sooner than they would by staying in forbearance. The Department 
anticipates these benefits would be most likely to occur for borrowers 
seeking PSLF due to the shorter number of

[[Page 3697]]

required payments before receiving forgiveness.

Background

    Section 455(d)(1) of the HEA directs the Secretary to offer 
borrowers a range of loan repayment plans, including an income-
contingent repayment plan. The Secretary first met this requirement by 
issuing final regulations for the original ICR plan in 1994,\4\ and 
then expanded the options available to borrowers under this authority 
with the creation of PAYE and REPAYE as income-contingent repayment 
plans in 2012 and 2015, respectively.\5\ On July 10, 2023, the 
Department published the IDR final rule amending the terms of REPAYE 
and renaming it the SAVE plan.\6\ Among other changes, that rule 
prevented student borrowers from enrolling in the PAYE or ICR plans 
after July 1, 2024, if they were not already enrolled in those plans or 
if they were a parent PLUS borrower with a consolidation loan looking 
to enroll in the ICR plan. The Department explained this change on the 
grounds that the SAVE plan was the best option for most borrowers. 
Because the SAVE plan would be available to all student borrowers, the 
Department would fulfill its obligations under Sec. 455(d)(1) of the 
HEA to offer an income-contingent repayment plan.
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    \4\ 59 FR 61664 (December 1, 1994).
    \5\ 77 FR 66088 (November 1, 2012); 80 FR 67204 (October 30, 
2015).
    \6\ 88 FR 43820 (July 10, 2023).
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    The changes made in the IDR final rule were challenged in Federal 
court following publication. On August 9, 2024, the Eighth Circuit 
issued an injunction pending appeal that, among other things, enjoins 
changes in loan repayment terms that would: increase the amount of 
income protected from payments; decrease the share of income borrowers 
pay on undergraduate loans; and cease charging monthly interest that is 
not covered by a borrower's payment.\7\
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    \7\ Missouri, 112 F.4th at 538.
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    The Department is undertaking efforts to implement a version of the 
SAVE plan compliant with the Eighth Circuit injunction. However, until 
that work is complete, the regulatory limitations affecting access to 
older plans meant that the Department was not complying with the HEA 
requirement to offer borrowers an income-contingent repayment plan.
    The IFR and this final rule address this problem through a time-
limited reopening of the PAYE and ICR plans to new enrollments. Under 
the IFR and this final rule, borrowers may select these plans until 
July 1, 2027. As explained in the IFR, we chose this date to also allow 
time for the Department to offer an income-contingent repayment plan 
that is compliant with the Eighth Circuit's injunction pending appeal 
and to issue any new regulations that may be needed.

Public Comment

    In response to our invitation in the IFR, 107 parties submitted 
comments on the IFR. In this preamble, we respond to those comments, 
which we have grouped by subject. Generally, we do not address 
technical or other minor changes.
    Analysis of Comments and Changes: An analysis of the public 
comments and of changes since publication of the IFR follows.

General Support

    Comments: Several commenters appreciated that the Department re-
opened the PAYE and ICR plans to borrowers. One commenter, a borrower 
who is currently affected by the litigation putting the SAVE plan on 
hold, expressed the view that reinstitution of PAYE is a critically 
necessary and sensible step. This commenter noted borrowers have made 
innumerable financial and other decisions that were dependent on the 
continued availability of PAYE and PSLF. There are specific terms to 
the PAYE and SAVE programs that make the availability of at least one 
of them crucial for households like the commenter's. The commenter also 
urged the Department to proceed expeditiously with processing 
applications for the PAYE and ICR plans as the current state of 
uncertainty around student loan repayment imposes a substantial burden 
on borrowers. Another commenter expressed the hope that the Department 
would process ICR and PAYE applications within three months of 
receiving the application.
    Another commenter stated that reopening more income-contingent 
repayment plans would not only make for a better repayment system for 
most borrowers, but it would improve the fairness and accuracy of loan 
repayments. This commenter stated that the current repayment option has 
proved inaccurate when considering those who are primarily affected by 
student loan debt. By implementing this new rule, they said many will 
be able to pay off their debt by affordable means. Implementation of 
the rule would also result in a fairer consideration of income, global 
issues like inflation, and overall financial stability when determining 
monthly payment amounts. Similarly, one commenter suggested that by 
implementing this new rule the income-contingent repayment options will 
help borrowers pay off their debts, as well as help improve the 
fairness and accuracy of loan repayments.
    One association agreed that the Department should offer borrowers 
an income-contingent repayment option during these uncertain times. 
This association urged the Department to be transparent and clear about 
all future action on IDR plans. This association also stated that many 
borrowers would benefit more from the provisions of the 2015 REPAYE 
plan until the courts issue a final decision on the SAVE plan.
    Discussion: We appreciate the commenters' support. The Department 
does not regulate the processing time for repayment plan applications 
but will work through pending applications as quickly as possible. The 
Department is working to build a version of the SAVE plan that complies 
with the Eighth Circuit's injunction. That plan would generally have 
the same terms as the 2015 REPAYE rule with respect to the monthly 
payment amounts for borrowers. At this time, the Department anticipates 
that such work will not be completed until at least the early fall of 
2025.
    Changes: None.

General Opposition

    Comments: Several commenters noted that they did not find the 
reopening of PAYE and ICR to be sufficient to address borrower 
challenges with loan repayment. Many noted that they were enrolled in 
the REPAYE plan before it converted to SAVE and had no issues with 
payments under REPAYE. They asked for a restoration of the REPAYE terms 
or asked to be placed on an alternative payment plan with the same 
payments that they had previously. Many stated that being placed in 
forbearance when they had not requested forbearance was unfair.
    Discussion: The Department is working to create a version of the 
SAVE plan that complies with the terms of the Eighth Circuit 
injunction. This plan will be largely similar to the terms of the 
REPAYE plan, with the exception that the injunction prevents the 
Department from providing the interest benefits that were also provided 
under the REPAYE plan. Both the 2015 REPAYE plan and the SAVE plan 
provided that a borrower with a subsidized loan would not be charged 
any unpaid interest for the first three years while enrolled in the 
plan and that all borrowers with subsidized or unsubsidized loans would 
only be charged 50 percent of unpaid interest after the first three 
years enrolled in the

[[Page 3698]]

plan. Until that revised plan is available, the Department will keep 
borrowers who remain enrolled in the SAVE plan in forbearance and 
interest will not accrue.
    Changes: None.
    Comments: One commenter believed that the regulations in the IFR 
represented an inadequate solution to a problem that ultimately was 
created from another inadequate solution: the Department moved people 
who were enrolled in the REPAYE plan into the SAVE plan and ultimately 
forced those borrowers into forbearance. This commenter recommended 
that the Department simply roll back the SAVE regulations and bring 
back REPAYE. This commenter asserted that by forcing people into SAVE, 
millions of borrowers will be left with no option but to default 
shortly otherwise.
    Commenters also suggested that REPAYE be reinstated and that 
borrowers who were previously enrolled in the REPAYE plan automatically 
be re-enrolled in that plan.
    Discussion: We disagree with commenters regarding their proposed 
changes to IDR plans. As we explained in the 2023 IDR final rule, the 
changes to the REPAYE plan that resulted in renaming it the SAVE plan 
made it the best choice for the vast majority of borrowers. And, for 
borrowers with a non-zero payment enrolled in REPAYE, the new SAVE plan 
would provide them with more affordable monthly payments. Automatically 
providing those benefits to borrowers without requiring the borrower to 
switch plans was simpler and more efficient.
    Regarding the requests to restore REPAYE, the Department is working 
to update the SAVE plan to make it compliant with the Eighth Circuit's 
injunction. That would result in monthly payment amounts that are 
similar to those that were available to borrowers enrolled in REPAYE.
    Changes: None.
    Comments: Several commenters noted the reopening of PAYE would not 
benefit them because they did not qualify for that plan because their 
loans were older. Many noted that being ineligible for PAYE meant that 
the IDR options available to them would result in much higher payments 
than what they had owed while enrolled in REPAYE. Some commenters 
called for the Department to expand eligibility for PAYE to older loans 
that are not currently eligible for that plan or to make Direct 
Consolidation Loans made after 2007 eligible. Others said that if the 
Department did not make REPAYE available then it should expand the 
eligibility for PAYE.
    Discussion: In pursuing changes through the IFR the Department 
considered narrow and time-limited solutions that address the current 
situation, and the IFR therefore restored the eligibility for other 
repayment plans to what was in effect prior to the issuance of the IDR 
final rule. The reopening of PAYE and ICR to borrowers not previously 
enrolled in those plans fulfills the Department's obligations because a 
borrower who is ineligible for PAYE could still choose ICR. We 
recognize that the ICR plan may not result in the lowest payment for 
many borrowers. However, as explained in the IFR, we are making a time-
limited and narrow change to address the Department's compliance with 
the HEA. Any other changes to PAYE would need to be considered through 
the full regulatory process.
    Changes: None.
    Comments: One commenter argued that if the Department cannot 
provide equivalent repayment options regardless of loan origination 
date, then the Department should write off those older loans.
    Discussion: The commenter did not identify a legal basis for 
writing off the loans they addressed. The eligibility dates for PAYE 
were established through a separate rulemaking process conducted in 
2012 and a similar process would be needed to adjust the eligibility 
dates for PAYE.\8\
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    \8\ 77 FR 66088 (November 1, 2012).
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    Changes: None.
    Comments: Several commenters raised concerns about the inability of 
borrowers to make progress on PSLF while enrolled in the SAVE 
forbearance. They called for the Department to make that forbearance 
eligible for PSLF.
    Discussion: As the Department has indicated, we do not have the 
ability to award credit toward forgiveness on PSLF during the SAVE-
related forbearance. The reopening of the PAYE and ICR plans provides a 
path for some additional PSLF borrowers to make payments that will 
count toward forgiveness.
    Changes: None.
    Comments: One group strongly opposed the Department's rule to 
exclude the ``double consolidation loophole'' for consolidation loans 
that repaid a parent PLUS loan from repayment plans and argued that it 
was contrary to the HEA. They called for the Department to at least 
extend the deadline after which double consolidated parent PLUS loans 
could not access repayment plans besides ICR from July 1, 2025.
    Discussion: The Department declines to adopt any changes to the 
treatment of parent PLUS borrowers in this final rule. As noted in the 
IFR, the Department is focused on a narrow change to make sure that we 
are meeting our obligation to offer borrowers an income-contingent 
repayment plan under section 455(d)(1) of the HEA. The Department 
already met this obligation with respect to Parent PLUS borrowers with 
a consolidation loan because there was no deadline for them to access 
the ICR plan. The Eighth Circuit's injunction does not affect the 
ability of borrowers to consolidate their loans as processing of those 
applications continues. As such, we see no grounds for extending that 
deadline.
    The Department also declines to change the overall eligibility for 
consolidated Parent PLUS borrowers. This issue was carefully considered 
during negotiated rulemaking and the notice and comment process that 
produced the IDR final rule.
    Changes: None.

Executive Orders 12866, 13563, and 14094

Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive Order and 
subject to review by OMB. Section 3(f) of Executive Order 12866, as 
amended by Executive Order 14094, defines a ``significant regulatory 
action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $200 million or more 
(adjusted every 3 years by the Administrator of the Office of 
Information and Regulatory Affairs (OIRA) at OMB for changes in gross 
domestic product), or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, territorial, or 
Tribal governments or communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise legal or policy issues for which centralized review would 
meaningfully further the President's priorities, or the principles 
stated in the Executive Order, as specifically authorized in a timely 
manner by the Administrator of OIRA in each case.

[[Page 3699]]

    This proposed regulatory action is a significant regulatory action 
subject to review by OMB under section 3(f)(4) of Executive Order 
12866, as amended by Executive Order 14094. However, the proposed 
annual net budget effect is not larger than $200 million, and as a 
result this regulatory action is not significant under section 3(f)(1) 
of Executive Order 12866, as amended by Executive Order 14094. We have 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action and have determined that the 
benefits will justify the costs.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and considering--among 
other things and to the extent practicable--the costs of cumulative 
regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' OIRA has emphasized 
that these techniques may include ``identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that in the Department's estimation best balance the size of 
the estimated transfer and qualitative benefits and costs. Based on the 
analysis that follows, the Department believes that these final 
regulations are consistent with the principles in Executive Order 
13563.
    We have also determined that this regulatory action will not unduly 
interfere with State, local, territorial, and Tribal governments in the 
exercise of their governmental functions.
    Consistent with Circular A-4, we compare the final regulations to 
the current regulations. In this regulatory impact analysis, we discuss 
the need for regulatory action and summarize key provisions, potential 
costs and benefits, net budget impacts, and the regulatory alternatives 
we considered.
    Elsewhere in this section under Paperwork Reduction Act, we 
identify and explain burdens specifically associated with information 
collection requirements.

1. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
OIRA has found that this rule does not meet the criteria in 5 U.S.C. 
804(2).

2. Need for Regulatory Action

    As discussed earlier in this document, these regulations allow the 
Department to offer at least one repayment option under the income-
contingent repayment authority to borrowers on a time-limited basis 
while the Department actively works to carry out the operational steps 
necessary to offer an injunction-compliant version of the SAVE plan.

3. Summary of Comments and Changes From the Interim Final Rule

    None of the submitted comments addressed the RIA, and there are no 
changes from the interim final rule to the final rule.

4. Discussion of Costs, Benefits and Transfers

    This rule finalizes an adjustment to the eligibility requirements 
that allow borrowers to enroll in the ICR and PAYE plans until July 1, 
2027, an extension from the prior date of July 1, 2024.
    As described further in the Net Budget Impact section of this RIA, 
the Department does not estimate a significant budgetary impact from 
this regulation. For existing borrowers, the Department already assumes 
in our budget baseline that borrowers who would benefit from PAYE or 
ICR over SAVE in the long term are already enrolled in those plans. As 
noted in the IDR Final Rule that established the SAVE plan,\9\ the 
Department's budget modeling assigns IDR borrowers to specific plans 
based on a comparison of the net present value of the payments the 
borrower makes under the various plans for which they are eligible. For 
future borrowers, we anticipate continued availability of the SAVE plan 
and do not evaluate borrowers having the choice of ICR or PAYE against 
income-based repayment (IBR) in the absence of SAVE. Moreover, the 
time-limited nature of these changes means that only a future borrower 
who enters repayment by July 1, 2027, would be able to select the ICR 
or PAYE plans.
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    \9\ 88 FR 43820 (July 10, 2023).
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    The primary benefit of these changes for the Department is that 
they allow us to meet our statutory obligation under the HEA to offer 
payments under the income-contingent repayment authority. There may 
also be secondary benefits to the Department. One is the possibility 
that borrowers will choose to enroll in PAYE or ICR instead of becoming 
delinquent or going into default. Another is a possible reduction in 
questions or concerns from borrowers, such as those seeking PSLF 
forgiveness, who are trying to determine how to make qualifying monthly 
payments.
    Borrowers who elect to enroll in the PAYE or ICR plans during this 
time-limited period may also see benefits, which could include 
additional certainty about their payment amounts in the face of 
litigation as well as the ability to make progress toward certain types 
of forgiveness during the time until the pending cases are resolved. 
For instance, there are approximately 200,000 borrowers enrolled in the 
SAVE plan who have certified at least some employment toward PSLF, and 
who are eligible for the PAYE plan, but who are not eligible for the 
terms of the IBR plan offered to borrowers who first took out a loan on 
or after July 1, 2014. If these individuals choose to sign up for PAYE, 
they would be able to continue making progress toward PSLF by making 
payments equal to 10 percent of their discretionary income. By 
contrast, if these borrowers did not have access to PAYE, they would 
have to choose a version of the IBR plan that sets their payments at 15 
percent of discretionary income. For instance, a single borrower who 
makes $60,000 a year would pay $318 a month when enrolled in PAYE 
instead of $477 if enrolled in the older IBR plan, a savings of $159. 
It is possible that there may be other borrowers enrolled in SAVE who 
would consider a switch on a temporary basis, such as a borrower who 
would have a $0 payment when enrolled in either

[[Page 3700]]

PAYE or ICR. There were also just over 800,000 borrowers who switched 
from either of these plans into SAVE after its creation.
    Beyond borrowers currently enrolled in SAVE, there are 
approximately 13.9 million borrowers who are in repayment and who do 
not have Parent PLUS loans who are not currently enrolled in an income-
contingent repayment plan.\10\ While the Department cannot speculate on 
how many of these borrowers may want to sign up for either ICR or PAYE, 
depending on their eligibility, the Department is not currently meeting 
its obligations under the HEA to provide these borrowers with an 
income-contingent repayment option.
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    \10\ We exclude borrowers with a Parent PLUS loan because those 
who consolidate would have access to the ICR plan regardless of this 
final rule. This number also excludes borrowers in deferments.
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    The monthly payment savings described above would be similar for 
any borrower with older loans that are not eligible for the version of 
IBR for newer borrowers but who is eligible for PAYE. This could 
include borrowers who have recently returned to repayment through the 
Department's Fresh Start Initiative, which allowed borrowers to take 
certain steps to get their loans out of default. It also could include 
borrowers with older loans who are now considering IDR plans.
    The IFR anticipated administrative costs of $400,000 to reflect the 
costs of updating systems to allow borrowers to access PAYE and ICR. 
Those costs have already been incurred and paid as we implemented the 
IFR. There are no additional administrative costs from this final rule.
    The ability to select PAYE or ICR could also create costs in the 
form of transfers if borrowers are able to select plans that produce 
lower payments over the borrower's time in repayment. The nature and 
extent of these costs depends on baseline policy, namely what other 
plans are available and the terms of those plans. We do not anticipate 
these costs will be significant, as we discuss in the Net Budget Impact 
section.
    There may be additional costs related to the potential that 
borrowers may have a harder time choosing among repayment plans. 
However, we think several factors mitigate this concern. One is that, 
until a version of the SAVE plan that is compliant with the court 
injunction is available, the number of options for borrowers to make 
payments while enrolled in an income-contingent repayment plan will not 
be appreciably larger. For some borrowers, the ICR plan may be their 
only option, while the choice for borrowers who are eligible for PAYE 
and ICR should be simple, because the former generally produces lower 
payments for most borrowers. Over the long run, the time-limited nature 
of these changes means that eventually borrowers will go back to 
choosing the SAVE plan, or the ICR plan if they have a consolidation 
loan that repaid a Parent PLUS loan. The Department will also continue 
working to improve and update tools available to help borrowers choose 
their repayment plan.

5. Net Budget Impact

    As the Department expects the SAVE plan to be available and 
advantageous to most borrowers in the long run, we do not estimate a 
significant budget impact from making PAYE and ICR available again to 
eligible borrowers, including those who had chosen SAVE. As was noted 
in the IDR final rule that created the SAVE plan (88 FR 43820), the 
Department's budget modeling assigns IDR borrowers to specific plans 
based on a comparison of the net present value of the payments the 
borrower makes under the various plans for which they are eligible.\11\ 
That means the borrowers we estimate would be better off enrolled in 
PAYE or ICR are already in that plan in the President's Budget for FY 
2025 (PB2025) baseline. These borrowers are generally going to be those 
who have graduate school related debt and those with incomes that are 
expected to rise to the point where their calculated payment would 
eventually be equal to or greater than what they would owe while 
enrolled in the 10-year standard repayment plan. These borrowers might 
be better off enrolled in PAYE because the terms of PAYE, absent the 
current injunction, provide for forgiveness after 20 years of payments 
instead of the 25 years when enrolled in IBR if the loan was borrowed 
before July 1, 2014, or the 25 years for graduate borrowers enrolled in 
SAVE.\12\ In addition, PAYE caps payments at the amount determined 
under the 10-year standard plan for borrowers so long as their payments 
were below that level when they first enrolled. By contrast, there is 
no payment cap in SAVE. With this assumption that borrowers know their 
income and family profile trajectories over the life of their loans and 
choose the plan that offers the lowest lifetime, present-discounted 
payments, the regulation provides borrowers with an option to enroll in 
a non-SAVE income-contingent repayment plan that does not have a 
significant scoreable budgetary impact.
---------------------------------------------------------------------------

    \11\ 88 FR 43886 (July 10, 2023).
    \12\ Forgiveness on income-contingent repayment plans that is 
based on the income-contingent repayment authority is currently 
enjoined, but the modeling discussed here took place prior to that 
injunction.
---------------------------------------------------------------------------

    However, there is considerable uncertainty regarding when borrowers 
who enroll in SAVE may see their payments resume due to ongoing 
litigation. A lengthy forbearance for borrowers enrolled in the SAVE 
plan could lead some borrowers to decide to enroll in a different 
income-contingent repayment plan if that would result in a lower net 
present value of payments. To evaluate this, the Department has done a 
sensitivity analysis that includes a nine-month forbearance in FY 2025 
that does not count toward IDR forgiveness with the PB2025 baseline 
SAVE borrowers and compared that to a run with the SAVE or PAYE/ICR 
choice redone to include that forbearance in the choice decision. As is 
the case for the baseline choice decision, the plan choice for the 
sensitivity is based on the net present value (NPV) at a 30 percent 
discount rate between the cashflow streams for each plan generated for 
the borrower sample. This is the approach the Department has used for 
modeling IDR plan choice decisions and considers changes across the 
entire payment stream. This approach assumes borrowers know their 
income and family profile trajectories over the life of their loans and 
choose the plan that offers the lowest lifetime, present-discounted 
payments. The Department recognizes that borrowers may use different 
logic when choosing a repayment plan, such as comparing near-term 
monthly payments, and will not have information about their future 
incomes and family patterns to match this type of analysis, but we 
believe any decision logic would result in a relatively small 
percentage of borrowers choosing to revert to PAYE or ICR long-term. 
The sensitivity run resulted in a cost of $70.5 million, which 
represents the effect of the change in payments on the estimated net 
present value of all future non-administrative Federal costs associated 
with cohorts of loans.

6. Accounting Statement

    Consistent with OMB Circular A-4, we have prepared an accounting 
statement showing the classification of the expenditures associated 
with the provisions of these regulations. These effects occur over the 
lifetime of the first ten loan cohorts following implementation of this 
rule. The cashflows are discounted to the year of the origination 
cohort in the modeling process and then those amounts are discounted at 
two percent to the present year in this Accounting Statement. This

[[Page 3701]]

table provides our best estimate of the changes in annualized monetized 
transfers that result from these final regulations. Expenditures are 
classified as transfers from the Federal government to affected student 
loan borrowers.

      Table 6.1--Accounting Statement: Classification of Estimated
                              Expenditures
                              [In millions]
------------------------------------------------------------------------
                  Category                             Benefits
------------------------------------------------------------------------
Complying with statutory requirements to     Not quantified.
 offer an income-contingent repayment plan.
------------------------------------------------------------------------
Category                                     Costs
                                             2%
------------------------------------------------------------------------
One-time administrative costs to Federal     $0.4.
 government to update systems and contracts
 to implement the final regulations.
------------------------------------------------------------------------
Category                                     Transfers
                                             2%
------------------------------------------------------------------------
Reduced transfers from borrowers based on    Not quantified.
 borrowers now accessing PAYE or ICR.
------------------------------------------------------------------------

7. Alternatives Considered

    The Department considered one alternative in issuing this final 
rule. We considered further adjusting the eligibility dates of PAYE to 
allow borrowers with older loans to access this plan. Doing so would 
have been responsive to commenters who noted that they are not 
currently eligible for PAYE and that their options while enrolled in 
IBR would result in significant payment increases, and that the entire 
situation was created by reasons outside of their control. However, we 
determined such a change would need to be made by following a full 
rulemaking process.

8. Regulatory Flexibility Act

    The Secretary certifies, under the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), that this final regulatory action will not have a 
significant economic impact on a substantial number of ``small 
entities.'' \13\
---------------------------------------------------------------------------

    \13\ 5 U.S.C. 601(3), (4), (5), and (6) defines small business, 
small organization, small governmental jurisdiction, and small 
entity, respectively.
---------------------------------------------------------------------------

    These regulations will not have a significant impact on a 
substantial number of small entities because they are focused on 
arrangements between individual borrowers and the Department. There are 
no small entities that are impacted by this rule. This rule does not 
affect institutions of higher education in any way, and those entities 
are typically the focus of the Regulatory Flexibility Act analysis for 
the Department of Education.

9. Paperwork Reduction Act

    We have determined that there are no Paperwork Reduction Act of 
1995 implications specifically associated with regulations in this 
final rule. Borrowers who wish to sign up for PAYE or ICR repayment 
plans under this Final Rule will be completing the form that already 
exists for enrollment in other IDR plans, OMB Control Number 1845-0102. 
To accommodate the changes made to the programs in the IDR final rule 
and the court challenges, we are separately updating the current IDR 
form and will be providing a public comment period. We do not estimate 
any new burden to 1845-0102 from this final rule.

10. Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
Order is to foster an intergovernmental partnership and a strengthened 
Federalism. The Executive Order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.

11. Assessment of Educational Impact

    In the IFR we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available. 
Based on the response to the IFR and on our review, we have determined 
that these final regulations do not require transmission of information 
that any other agency or authority of the United States gathers or 
makes available.

12. Federalism

    Executive Order 13132 requires us to provide meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have Federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. The regulations do not have Federalism implications.
    Accessible Format: On request to the program contact person(s) 
listed under FOR FURTHER INFORMATION CONTACT, individuals with 
disabilities can obtain this document in an accessible format. The 
Department will provide the requestor with an accessible format that 
may include Rich Text Format (RTF) or text format (txt), a thumb drive, 
an MP3 file, Braille, large print, audiotape, or compact disc, or 
another accessible format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. You can view this document, as 
well as all other Department documents published in the Federal 
Register, in text or Adobe Portable Document Format (PDF) at this site. 
To use PDF, you must have Adobe Acrobat Reader, which is available free 
at the site.
    You may also access Department documents published in the Federal 
Register by using the article search feature at 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects in 34 CFR Part 685

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs-education, Reporting and recordkeeping

[[Page 3702]]

requirements, Student aid, Vocational education.

Miguel Cardona,
Secretary of Education.

0
For the reasons stated in the preamble, the Department adopts the 
interim rule published on November 15, 2024, at 89 FR 90221, as final 
without change.

[FR Doc. 2025-00724 Filed 1-13-25; 4:15 pm]
BILLING CODE 4000-01-P
```