Biden plans to cut student loan payments by the millions and pause anyone making less than $30,600 a year while his multi-billion dollar forgiveness program fights in the Supreme Court.
- The Biden administration took a step on Tuesday that will cut student loan payments by millions
- It would stop payments entirely to borrowers making less than $30,600 a year
- As the president’s pardon plan heads to the Supreme Court, the administration is moving forward with changes to the income-driven reimbursement
The Biden administration took a step on Tuesday that will cut student loan payments by millions and halt payments altogether to borrowers who earn less than $30,600 a year.
Proposed amendments to the income-driven repayment plan would allow borrowers to pay just 5 percent of their discretionary income, down from 10 percent, on federal student loans for college students.
“Student debt has become a dream killer,” Education Minister Miguel Cardona said in a phone call with reporters Monday night. “This is a promise to the American people that, finally, we will fix a broken system and make student loans more affordable.”
Education Department officials call the new plan the “Student Loan Safety Net.”
President Joe Biden’s administration (left) took a step Tuesday that would lower monthly student loan payments for millions of Americans, as Education Secretary Miguel Cardona (right) warned that high student loan payments have become a ‘dream killer’.
Since income-based repayment now works, up to 10 percent of a borrower’s discretionary income can go toward student loan bills.
Only those making less than $20,400 are not required to pay.
The new proposal states that anyone earning less than $30,600 will not have to make payments, or a borrower in a family of four earning less than $62,400.
The updated plan will also cap interest, with no accrued interest added to borrowers’ balances if they make their monthly payments.
The government will also forgive loans in a shorter period of time.
College borrowers will be forgiven of their loans no later than 20 years after repayment.
For those who made just $12,500 or less, the loans can be forgiven after 10 years.
Each $1,000 will add more than $12,500 an additional year, but will still have a 20-year tolerance cap.
The Biden administration will also defer payments due to receiving cancer treatments or counting military service into the loan forgiveness.
The Education Department proposed the payment plan changes Tuesday by publishing them in the Federal Register, opening them up for public comment.
The plan gives little relief to borrowers who have borrowed for graduate programs.
Graduate borrowers will continue to pay 10 percent of their discretionary income on student loan bills.
If the borrower takes out loans from both undergraduate and graduate school, he will pay between 5 and 10 percent of his discretionary income.
In addition, graduate loans will remain at the 25-year forgiveness level.
President Joe Biden entered office when federal student loan payments, which former President Donald Trump implemented at the start of the COVID-19 pandemic in March 2020, were paused.
He appeared reluctant to cancel large portions of the loans as Democrats, including Senate Majority Leader Chuck Schumer, pushed him to write off up to $30,000 per borrower.
In August, he announced that he would cancel $10,000 in student loan debt for any US borrower earning less than $125,000 a year.
However, the Republicans challenged the debt relief and went to the Supreme Court.
The nine justices will hear oral arguments in February in two cases challenging the legality of the Biden platform.
Meanwhile, the president has extended the payment moratorium, announcing in November that federal student loan payments will resume 60 days after the litigation is resolved or 60 days after June 30, whichever comes first.