According to an article, “Obama moves to expand student loan payment relief” on FoxNews.com, President Obama has signed an executive order that will expand a program that lets borrowers pay no more than 10 percent of their income towards student loans. Obama says the program expansion could help an additional five million borrowers lower their monthly payments.
This repayment plan, originally announced by Obama in 2010, was only available to those who started borrowing in 2007. The executive order signed on June 9, 2014 expands the existing program by making it open to those who borrowed anytime in the past.
What does all of this mean for student loan servicers? Because income-based repayment caps a borrower’s payment at 10 percent of their monthly income, and is calculated based on a borrower’s annual adjusted gross income (AGI), loan servicers will need to be prepared to obtain borrowers’ tax transcripts on a yearly basis.
If the loan holder believes a borrower’s most recent AGI does not reasonably reflect their current income, they are authorized to use alternative documentation to verify income. In this instance, servicers should be prepared to obtain proof of income, and need to be cautious about altered documentation should it be obtained directly from the borrower.
For more specific insights and best practices related to compliance of this expanded program, you can connect directly with an Equifax representative by emailing email@example.com with “Pay as you earn” in the subject line.
Be sure to follow our Insights blog to get the most up-to-date information on this and other industry topics.