Photo: Paul Morigi/Getty Images
The administration of Joe Biden is pushing another approach to address the crisis of student debtwhile his main initiative, a plan to forgive up to $20,000 in student loan per borrower, remains mired in legal limbo, awaiting a ruling from the conservative-leaning Supreme Court.
Even if the courts strike down the debt forgiveness effort, Plan B unveiled by the Department of Education in a statement Tuesday could help millions of borrowers by Review payment plans based on income.
“Today, the Biden-Harris administration is proposing historic changes that would make student loan repayments more affordable and manageable than ever before,” Secretary of Education Miguel Cardona said in a statement.
The income-based payment plan also addresses some of the worst student debt traps, such as “negative amortization,” which is what happens when a person’s loan balance continues to grow despite consistently making payments.
The plan for reform income-based repayment (IDR) planswas first announced in August, but fell behind the Biden administration’s plan to forgive up to $20,000 in debt per borrower.
But with the student debt relief program halted by legal challenges, the Department of Education said it is moving forward with the other part of its plan and will review IDRs with the goal of assisting low- and middle-income borrowers.
A plan that can really lower student debt
A new student loan repayment proposal filed by the Department of Education on Tuesday reduce the amounts of the monthly payments for some Americans and would completely stop payments for others.
Changes from the Department of Education to the Income Based Loan Repayment Plan (IDR) could provide student loan relief after the full pause on payments is lifted, which has been extended until the end of June 2023.
The new regulations would allow borrowers who earn less than about $30,600 a year make monthly payments of $0 dollar on your federal student loans, effectively stopping them.
The same effective break would apply to families of 4 earning less than $62,400 per year.
The changes would also halve undergraduate loan monthly payments for borrowers who earn more than those annual amounts.
The Department of Education estimates that the changes would reduce future borrowers’ loan payments by 40%, while low-income borrowers’ payments could be reduced by 83% less.
It is not known when the changes will be implemented, although they will be subject to public comment for 30 days after their publication in the Federal Register on Wednesday.
It may interest you:
– Joe Biden extends student debt pause until June
– Supreme Court puts Biden’s proposed student debt forgiveness on hold
– Supreme Court addresses another showdown over Biden student debt relief plan