The federal government is trying to fixing a big problem with a generous repayment plan for guaranteed student loans: borrowers often get kicked out of it when they fail to resubmit paperwork each year.

Income-based repayment plans introduced a few years ago slow down the rate of repayment for struggling borrowers to as long as 25 years by capping monthly payments to as little as 15% of their discretionary income.

But borrowers are required to demonstrate once a year that they qualify by filing paperwork with the Education Department. In many cases, borrowers who fail to provide this information in a timely fashion see their payments rise dramatically  when amounts are reset based on the amount needed to pay off the loan under a 10-year repayment schedule, rather than the borrower’s income.

The new plan will make it easier for borrowers to recertify by providing consent for the Internal Revenue Service to electronically share tax data with the Education Department and its loan servicers for multiple years.

This will eliminate the need for these borrowers to send in their income information to FSA on an annual basis, as is currently required.

“A multi-year consent system will provide relief for millions of student loan borrowers and will reduce unnecessary forbearances, delinquencies and defaults,” Treasury Deputy Secretary Sarah Bloom Raskin said in a press release Tuesday  “Income-driven repayment plans provide an affordable option for borrowers, and this multi-year consent system has the potential to improve outcomes for many of them.”

 “Together with our sister agencies, we’ve identified a commonsense partnership that will make it easier, not harder, for millions of Americans with student loans to  maintain continued access to the benefits that help them successfully manage loan repayment,” said U.S. Under Secretary of Education Ted Mitchell.

Under the framework agreed to by Treasury and Education, the consent system will be housed at the Department of Education.  The information shared with Education will be limited to what is necessary for the purpose of determining loan payment levels under income-driven repayment plans.  Student loan borrowers providing this consent will have the option to revoke their consent should they change their mind.

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