The U.S. Department of Education has published two regulatory packages as a result of the Department’s proposed Cash Management regulation in May.

According to an official release from the Department of Education, the new regulations are intended to protect students in the college debit and prepaid card marketplace, as well as add a new income-based repayment plan that would enable more borrowers to limit the amount of their payments to 10% of their income.

The newly published regulations targeted three primary goals: that students would be able to “freely choose how to receive Federal student aid refunds; be given objective and neutral information about their financial aid disbursement options; and will no longer be forced to pay excessive fees to access their Federal student aid, including Pell Grants.” Per the DoED release, the regulations will also:

• Require institutions to give students greater choice about how to receive their student aid.
• Prohibit institutions from requiring students or parents to open a certain account into which their student aid refunds are deposited.
• Require institutions to ensure that students are not charged excessive and confusing fees (e.g., overdraft fees and transaction-swipe fees) if a student selects an account offered directly or indirectly by contractors that assist institutions in making direct payments of Federal student aid.
• Require an institution to provide students with a list of account options that the student may choose from to receive their student aid refunds, where each option is presented in a neutral manner and makes clear that the student can have their student aid deposited to their preexisting bank account.
• Require institutions to ensure that electronic payments made to a student’s preexisting account are made as timely as, and no more onerous to the student than, payments made to accounts marketed through the institution.
• Allow institutions to share limited student information with third-party servicers that offer financial products to allow the continued functioning of disbursement processes, while also protecting private student information, such as Social Security numbers or portions thereof.

The other regulatory package published by the DoED deals with student loan debt and comes in the form of the Revised Pay As You Earn (REPAYE) Plan. REPAYE is a response to President Barack Obama’s June 2014 Presidential Memorandum directing the DoED to propose regulations to ease student loan debt by expanding repayment options to students.

REPAYE will now allow “five million more Direct Loan borrowers to cap their monthly student loan payment amount at 10% of their annual income, allocated per month, without regard to when the borrower first obtained their loans.” Per the DoED’s official release, this final regulation also includes the following:

• Starting in 2016, an expansion of the circumstances under which institutions may challenge or appeal a cohort default rate that appears artificially high because of a corresponding low rate of student borrowing.
• Starting July 1, 2016, new procedures for FFEL Program loan holders to identify service members who may be eligible for a lower interest rate under the Service members Civil Relief Act (SCRA), enabling these borrowers to receive this important benefit automatically.
• A requirement that guarantors provide information to FFEL Program borrowers on repayment plans available to them after they rehabilitate their defaulted loans, to help ensure that borrowers have a smoother transition to regular repayment. This section of the regulations will be implemented July 1, 2016.
• And a provision to allow lump-sum payments made on behalf of borrowers through student loan repayment programs administered by the Department of Defense to count toward Public Service Loan Forgiveness, similar to the application of lump sum payments for Peace Corps and AmeriCorps volunteers. This action assures that these borrowers benefit more fully from their public service employment.
• The new REPAYE repayment plan will be available to borrowers starting this December. Borrowers interested in enrolling in learning more about income-based repayment options can visit www.StudentAid.gov/IDR or contact their loan servicers.

CR80News intends to cover the regulations more comprehensively as additional information is made available.

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