Contact Congress - New law could add to loan debt burden

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The economic hardship deferment pathway known as "20/220" is in danger of being permanently eliminated. The 20/220 pathway allows most residents to defer student loan debt for up to three years while in training. The elimination of this deferment option would require most residents to begin unaffordable monthly payments on their loans or enter into forbearance. Here's what you can do to ensure that this important deferment option is not eliminated:

Contact Congress
Directly contact your Representative and Senators using the Calling Script (PDF, 27KB) prepared by the AMA. The script includes Congressional contact information and answers to frequently asked questions. You can also contact your Congressional members though the AMA CapWiz site.  CapWiz provides pre-written text to use as-is or modify as you desire.  Your address and ZIP code will be used to automaticallty route the message to your Representative and Senators.

Educate your fellow medical students
The MSS Committee on Legislation and Advocacy (COLA) has developed an issue brief (PDF, 63KB) and other materials explaining how the elimination of the 20/220 rule will affect your finances and how you can take action to fight these changes.  We urge you to share this issue brief with other medical students at your school. 

Latest news

May 20, 2008
During the April 2008 meeting of the Department of Education’s (DOE) Student Loan Committee, it was reiterated that the 20/220 pathway was removed from the draft regulations for cost reasons, indicating that the 20/220 pathway is estimated to cost $1 billion over 10 years.  The DOE will publish its proposed rule for implementing the CCRAA in the next few months, during which the AMA and other stakeholder groups will be able to submit comments in support of maintaining the pathway.  As of right now, graduating medical students and eligible residents can still apply for the 20/220 pathway and obtain a year-long deferment if they do so before July 31, 2009.

The AMA continues to urge Congress to reinstate the 20/220 pathway or provide an equivalent funding mechanism for loan deferment in the final HEA reauthorization conference report.  H.R. 4137 and S. 1642, the respective HEA reauthorization bills in the House and Senate, will require the House and Senate to resolve differences between the bills before final passage.  On May 20, the Senate passed S. 3035, which extends the programs under the HEA through June 30, 2008.

March 12, 2008
The AMA, in conjunction with the AAMC, sent a letter (PDF, 67KB) to all members of the House and Senate education committees, urging them to reinstate the 20/20 pathway through the conference process for the Higher Education Act (HEA) reauthorization bills. 

March 11, 2008 - Department of Education removes 20/220 provision
The Department of Education's (DOE) third negotiated rule-making meeting, through which the DOE is formulating new regulations governing economic hardship deferment and other student loan programs, took place last week. Unfortunately, in a turnaround from previous meetings, the DOE announced during the session that it would be removing the 20/220 pathway provision, which allows 67% of entering residents to apply for economic hardship deferment. The DOE indicated that it was doing so due to the prohibitive cost of maintaining the 20/220 pathway.

The DOE will issue the proposed regulations in the next few months for public comment. Final regulations will not be issued until the fall; they must be issued by November 1. The effective date for the final rule is July 1, 2009, so the 20/220 pathway will be retained until then.  The AMA will continue to monitor developments at DOE closely and provide updates to members; the next and final DOE meeting is in April.

Jan. 21, 2008 - AMA attending Department of Education hearings on CCRAA
The AMA and AAMC attended the first round of meetings during the U.S. Department of Education (DOE) rule-making process for the College Cost Reduction and Access Act of 2007 (CCRAA). The 20/220 pathway was among the topics discussed, and all comments made favored maintaining the program.  The next round of meetings will occur in early February, when the DOE will present a version of its proposed rules.  Our AMA will continue to attend these meetings and will continue to provide support for maintaining the deferment pathway during the public comment period.  In addition, Congress is expected to take up the Higher Education Act (HEA) within the coming month, which will provide another opportunity for students to make their voices heard on the importance of reinstating the 20/220 pathway through a legislative solution.

Dec. 1, 2007 - Residents facing denial of economic hardship deferment requests
Despite the temporary reinstatement of the 20/220 rule, it has come to the attention of the AMA and many of its medical student, resident, and fellow members that residents and fellows are still being denied economic hardship deferment on the grounds that the 20/220 pathway is no longer a valid qualifying criterion for deferment of Federal educational loans.

We believe that many lenders and loan servicers are simply unaware of the temporary reinstatement of the 20/220 rule. Although the DOE published its final regulations in the Federal Register, these regulations did not explicitly state that the 20/220 rule had been reinstated. Rather, the final regulations maintained the 20/220 rule by keeping intact the debt-to-income ratio section of the economic hardship deferment criterion while enacting the other changes called for by the new legislation.

The AMA contacted DOE about this urgent issue and subsequently received a DOE response (PDF, 57KB) indicating that the 20/220 pathway remains a valid qualifying criterion for deferment of Federal educational loans.

If your request for economic hardship deferment has been denied on the grounds that the 20/220 pathway is no longer a valid deferment option, we ask that you please contact the MSS with the following information: 1) your name and telephone number, and 2) the name and telephone number of the financial institution that denied your deferment request.

Nov. 7, 2007 - New legislative option to restore the 20/220 Pathway
After hearing from student and resident members and from AMA advocacy staff on the importance of hardship deferment, Senator Richard Burr (R-NC) introduced a bill, S. 2303, through which the 20/220 pathway would be reinstated and would continue to benefit the many residents who are eligible for deferment through the pathway.  (Read Senator Burr’s press release, which mentions AMA involvement on the issue and our concerns about the impact of 20/220 pathway elimination on students and physician shortages.)
Update: In December, a House bill to permanently reinstate 20/220 (H.R. 4344) was introduced. 

Nov. 1, 2007 - 20/220 Pathway extended through Fall 2008
Following our AMA’s advocacy efforts and the tremendous efforts by our Medical Student and Resident and Fellow Sections, the 20/220 pathway will continue through at least fall 2008.  (Read the AMA's press release.)

• The final rule, published today by the Department of Education, keeps the 20/220 pathway intact.  Through this rule, the Department of Education specifically revised sections of Title 34 of the Code of Federal Regulations in a manner which does not alter the language regarding the 20/220 pathway, but incorporates some of the other changes issued in the College Cost Reduction and Access Act.  Thus, the current 20/220 pathway to economic hardship deferment remains in place, until a negotiated rule-making process can occur, which will not be completed until fall of 2008.
• This development means that fourth year medical students and current residents will continue to be eligible for hardship deferment under the 20/220 pathway over the next year, and it also allows time over the coming year to pursue long-term legislative solutions to this problem.

Please keep in mind that this is a temporary fix, and that you can make your voice heard by contacting your legislators through the AMA CapWiz site action alert.

Background

On Sept. 27, 2007, Congress passed, and President Bush signed into law, the College Cost Reduction and Access Act of 2007 (H.R. 2669).  This new education financing law could adversely affect loan repayments for up to 67 percent of entering resident physicians.

H.R. 2669 eliminated the 20/220 rule as of Oct. 1, 2007:

• The 20/220 rule was a regulation that enabled many resident physicians to qualify for economic hardship deferment, and defer payment for three years without accruing interest on subsidized loans.
• Residents qualified for 20/220 rule if their debt burden was greater than 20 percent of their income, and if their income minus their debt burden was not greater than 220 percent of the federal poverty level for a family of two ($13,690). (Actual family size is irrelevant.)
• Now that the 20/220 rule has been eliminated, few residents will qualify for hardship deferment, leaving forbearance as the only remaining option for residents needing to avoid payments for there first three years in training.

H.R. 2669 Created an Income-Based Repayment program:

• Under the a new program created in H.R. 2669, loan repayments will be capped at 15 percent of the borrower’s income that is above 150 percent of the federal poverty level.
• For an independent single student the maximum qualifying monthly income will be $1,276 ($15,312 a year).
• However, this new program does not even begin until July 1, 2009. Residents who cannot afford to immediately start make monthly payments on their loans will be left with forbearance as the only remaining option during training.  Under forbearance, interest will accrue on all loans.

More information on H.R. 2669:

• Learn more (PDF, 43KB) about the new student loan deferment provisions, and obtain contact information for the House Education and Labor Committee, the Senate HELP Committee, and physician members of Congress.
• Read an analysis (PDF, 174KB) of how these changes will affect you and your student loan burden.

AMA position

The AMA feels strongly that elimination of the 20/220 rule in the middle of the year is disruptive and unfairly hits resident physicians at a time when they will be least able to make monthly payments on their education loans. The average resident earns just over $43,000 a year and carries a debt burden of more than $130,000.

The AMA has already sent letters reflecting its position to Congress and to the U.S. Department of Education:

• Letter (PDF, 41KB) sent to House and Senate leadership and to physician-legislators
• Letter sent to the U.S. Department of Education.

More information

Questions or comments? Please contact the MSS.  Please refer to the links below for more detailed information on H.R. 2669.

• Full text of H.R. 2669
• H.R. 2669 Conference Report (PDF, 173KB)