What's happening
This bill creates an income-driven repayment plan with loan forgiveness for private student loans held by New York state banking institutions.
Why it matters
Expands income-based repayment options. to borrowers with private student loans from New York banking institutions—a group that is typically excluded from federal loan repayment relief—potentially easing the financial burden for many private loan holders.
Defines “partial financial hardship” using a clear income formula. (payments exceeding 15% of income above 150% of the poverty guideline), making eligibility standards transparent and allowing borrowers to predict if they might qualify.
Requires annual income and family size verification,. meaning borrowers must actively recertify each year, which could help ensure that payments remain affordable as life circumstances change, but may also create an administrative burden or risk of losing eligibility for those who don’t comply.
Links loan forgiveness to sustained, on-time payments over 10 years of full-time employment,. incentivizing consistent repayment and employment but setting a high bar for relief. Any forgiven amount may be taxed as income by New York State, which could result in a significant tax bill for some borrowers.
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Who cares
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Cap Student Loan Payments
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to higher education
- Referred to higher education
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4893
2019-2020 Regular Sessions
IN SENATE
March 28, 2019
Introduced by Sens. PARKER, BAILEY -- read twice and ordered printed, and when printed to be committed to the Committee on Higher Education
AN ACT to amend the education law, in relation to creating an income driven repayment plan for private student loans held by New York state banking institutions
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The education law is amended by adding a new section 681-b to read as follows:
§ 681-b. Income-based repayment plan. 1. Definitions. As used in this section:
(a) "Adjusted gross income" or "AGI" shall mean the adjusted gross income as reported on the borrower's latest available state income tax return subject to any subsequent amendments or revisions. For a married borrower, filing jointly, AGI includes both the borrower's and spouse's income. For a married borrower filing separately, AGI includes only the borrower's income.
(b) "Eligible loan" shall mean any outstanding loan made by a private lender through a New York banking institution to a student who is a resident of and has attended an institution in this state or a parent of such a student.
(c) "Family size" shall mean the number that is determined by counting the borrower, the borrower's spouse, and the borrower's children, including unborn children who will be born during the year the borrower certifies family size, if the children receive more than half their support from the borrower. A borrower's family size includes other individuals if, at the time the borrower certifies family size, the other individuals:
(i) Live with the borrower; and
(ii) Receive more than half their support from the borrower and will continue to receive this support from the borrower for the year the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06027-01-9
S. 4893 2
borrower certifies family size. Support includes money, gifts, loans, housing, food, clothes, care, medical and dental care, and payment of college costs.
(d) "Partial financial hardship" shall mean a circumstance in which:
(i) For an unmarried borrower or a married borrower who files an individual state tax return, the annual amount due on all the borrower's eligible loans, as calculated under a ten-year standard repayment plan using the greater of the amount due at the time the borrower initially entered repayment or at the time the borrower elects the income-based repayment plan, exceeds fifteen percent of the difference between the borrower's AGI and one hundred fifty percent of the poverty guideline for the borrower's family size; or
(ii) For a married borrower who files a state tax return with his or her spouse, the annual amount due on all of the borrower's eligible loans and, if applicable, the spouse's eligible loans, as calculated under a ten-year standard repayment plan, using the greater of the amount due at the time the loans initially entered repayment or at the time the borrower or spouse elects the income-based repayment plan, exceeds fifteen percent of the difference between the borrower's and spouse's AGI, and one hundred fifty percent of the poverty guideline for the borrower's family size.
(e) "Poverty guideline" shall mean the income categorized by the state and family size in the poverty guidelines published annually by the United States department of health and human services and posted on the New York state department of health's website.
2. Qualifications. (a) The commissioner shall determine whether a borrower has a partial financial hardship to qualify for the incomebased repayment plan for the year the borrower selects the plan and for each subsequent year that the borrower remains on the plan. To make this determination, the commissioner shall require the borrower to:
(i)(A) Provide written consent for the disclosure of the AGI and other tax return information by the department of taxation and finance to the commissioner. The borrower shall provide consent by signing a consent form and returning it to the commissioner;
(B) If a borrower's AGI is not available or the commissioner believes that the borrower's reported AGI does not reasonably reflect the borrower's current income, the commissioner may use other documentation provided by the borrower to verify income; and
(ii) Annually certify the borrower's family size. If the borrower fails to certify family size, the commissioner assumes a family size of one for that year.
(b) A borrower's aggregate monthly loan payment based on the borrower's income-based repayment plan may increase or decrease annually due to changes in the borrower's AGI and family size.
3. Terms of repayment plan. (a) A borrower may select the income-based repayment plan only if the borrower has a partial financial hardship. The borrower's aggregate monthly loan payments are limited to no more than the annual amount due based on a ten-year standard repayment period.
(b) If a borrower's aggregate monthly loan payments become larger than those calculated on a ten-year standard repayment plan, a borrower's aggregate monthly loan payment shall no longer be calculated according to the borrower's AGI and family size. The borrower's aggregate monthly loan payment will be calculated under the ten-year standard repayment plan, the amount of which shall be equal to the borrower's aggregate
S. 4893 3
monthly loan payment at the time the borrower initially selected the income-based repayment plan.
4. Loan forgiveness. (a) To qualify for loan forgiveness after ten years, a borrower must have participated in the income-based repayment plan and satisfied the following conditions during that period:
(i) While employed full time, the borrower made one hundred twenty on-time and separate monthly payments after October first, two thousand nine on the loans which the borrower is requesting to be forgiven.
(ii) All payments must have been made no later than fifteen days after the required due date and must have been paid for the full scheduled amount.
(b) Any amount that is forgiven may be subject to New York state income tax if there is a balance remaining at the end of the repayment period.
§ 2. This act shall take effect on the ninetieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the education law, in relation to creating an income driven repayment plan for private student loans held by New York state banking institutions
Purpose or general idea of bill
Help recent college graduates who cannot find a job or are on a limited income who are required to begin making payments on their student loans immediately following graduation.
Modeled after President Obama's Income Driven Repayment Plans for Feder- al Student Loans. Sets a monthly student loan payment at an amount that is intended to be affordable based on income and family size. Monthly payments are based on income and family size which may result in no monthly payment.
Read the full memo (881 words)
Summary of specific provisions
This legislation amends the Education Law, in relation to creating an income driven repayment plan for private student loans held by New York State banking institutions.
This bill amends the Education Law by adding an income based repayment plan. An eligible student loan is any outstanding loan made by a private lender through a New York banking institution to a student who is a resident of New York State and has attended an institution in New York State or is a parent of such a student. It sets a monthly payment at an amount that is income related based on the household income and family size. The required payment under this plan must be lesser than what it would otherwise be paid under the Standard Repayment Plan with a ten year repayment period. Partial financial hardship shall mean circum- stances in which at the time the borrower files an individual state tax return, the annual amount due on all the borrower's eligible loans or at the time the borrower elects the income based repayment plan, exceeds fifteen percent of the difference between the borrower's AGI and one hundred fifty percent of the poverty guidelines for the borrower's fami- ly size. The commissioner will make the determination as to whether a borrower qualifies for partial hardship based on disclosure of the AGI and other tax information as well as annually certifying the borrower's family size. A borrower's aggregate income based monthly loan payment may fluctuate, that is increase or decrease annually based on changes to the AGI and family size.
To qualify for loan forgiveness after the ten years, a borrower must have participated in the income based repayment plan and while employed full time will have made one hundred twenty on-time and separate monthly payments beginning October 1st, 2007, on the loans for which forgiveness requalifies. Any amount that is forgiven may be subject to the New York state income tax if there is a balance remaining at the end of the repayment period.
Justification
It is known that currently over seventy percent of students take out a student loan so that they can attend college. A college-graduate has an average debt of $30,000.00. Student loan debt can be a road block preventing a graduate from purchasing a home, purchasing a car, building a savings for retirement forcing many students to reside with their parents longer than they initially expected. This can also lead to possible garnished wages and income tax returns seized by the government or money taken from Social Security checks.
Statistics show over 40 million Americans have incurred a student loan debt. Recent studies show that 1 out of every 7 students default on their student loan within three years of beginning repayment. Many recent college graduates find themselves to be underemployed immediately following graduation. Securing a job becomes increasingly difficult for, recent graduates. For some if they do find a job they are restricted to a low wage position or sometimes even working a part time job. Statis- tics show the 56% of recent college graduates are underemployed and working only on a part time basis. Education majors and health majors have the lowest unemployment rate at 3 to 4%. Architecture and construction majors have an unemployment rate of 8%. Liberal arts and social sciences major face a 7 to 8% unemployment rate. Studies show that for technology majors only 38% are working in a job that required a bachelor's degree. Among communication, liberal arts, business, and social sciences majors only 40 to 45% were working in jobs that required a bachelor's degree.
A survey conducted on workers who graduated in the past 2 years showed many recent graduates to hold a large amount of debt from their student loans and are in jobs that do not require a college degree. Only 53% of graduates were able to get a full time position in their field of study. There is also a gap in regards to anticipated earning upon graduation versus their actual salary. Fifteen percent of graduates think they will earn less than $25,000.00 a year while one a third of recent college graduates make that amount or less than that amount. It's estimated that for borrowers who started repayment in 2011 650,000 have already defaulted on their student loans by 2013.
Prior legislative history
2017-18: S3411- Referred to Higher Education 2015-16: S.4624/A.6605 - Referred to Higher Education
Fiscal implications for state and local governments
None
Effective date
This act shall take effect on the ninetieth day after it shall become law.
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