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Negotiators press department on rehabilitation reforms and stopping collections; department resists immediate halt
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Summary
Stakeholders proposed easing loan rehabilitation (lower payments, automatic IDR enrollment, stopping collections during rehab); department counsel and staff said rehabilitation is a process with statutory/fund constraints and indicated they were not prepared to stop collections but were open to continued discussion and drafting changes.
Negotiators spent a sustained portion of the session on proposed changes to loan rehabilitation (drafts cited as 682405 and 67439), including how many times a borrower may rehabilitate a loan, minimum payment rules, and whether collections should pause while a borrower is actively rehabilitating.
Tamara Hoffman presented stakeholder proposals to reduce rehabilitation payment amounts, enable immediate enrollment into income-driven or IBR plans after rehabilitation to prevent rapid re-default, allow online enrollment and automatic payments for rehabilitation agreements, and to stop collections for borrowers making timely rehabilitation payments. John Houston, department counsel, responded that rehabilitation is a process (not a single point in time) and that statutory effective dates govern when a second rehabilitation may begin; Jeff (Speaker 2) added that current policy permits guarantors to continue administrative wage garnishment until a borrower makes required qualifying payments and that the statute did not change that policy.
The draft language discussed would limit the number of rehabilitations: one rehabilitation for loans rehabilitated on or before June 30, 2027, and up to two rehabilitations on or after July 1, 2027, with benefits reinstated after rehabilitation. Negotiators asked the department to produce clarified regulatory text that specifies whether date distinctions should refer to loan disbursement dates or effective dates; the department agreed to recirculate revised text.
On the question of pausing collections while rehabilitation is ongoing, Tamara reported the caucus concluded department staff were not prepared to adopt such an approach at this time, though they signaled openness to continued conversation on making rehabilitation easier for borrowers.
Next steps: department staff will draft clearer regulatory language on rehabilitation timing, minimum payments, and related cross-references and circulate it to negotiators for review.
