Biden unveils fresh student loan repayment plan post Supreme Court’s rejection of initial one.
The Biden Administration Overhauls Student Loan Repayment Plans
The Biden administration on Tuesday announced significant changes to student loan repayment plans, aiming to make payments more affordable and reduce the amount owed each month while curbing unpaid interest.
According to the White House and the Department of Education, these changes will save the typical borrower $1,000 a year and $2,000 a year for graduates of four-year U.S. public colleges or universities. They also stated that tens of millions of Americans are eligible to enroll in the new plan.
President Joe Biden is actively pursuing various approaches to provide student debt relief, despite certain pieces of his plan being blocked by U.S. courts.
In June, the U.S. Supreme Court blocked a rule that would have canceled $430 billion in student loan debt for 43 million borrowers. Additionally, a federal appeals court recently halted a rule that would have made it easier for students defrauded by for-profit colleges to have their loans forgiven.
Student loan payments were paused during the COVID-19 pandemic but have since resumed. Biden, who is seeking re-election in 2024, has made strengthening the nation’s economy a top priority.
The Saving on A Valuable Education (SAVE) Plan
Under the newly announced Saving on A Valuable Education (SAVE) income-driven repayment plan, qualified borrowers will see a reduction in their monthly payments from 10 percent to 5 percent of discretionary income for undergraduate loans. Additionally, approximately 1 million more low-income borrowers will qualify for no monthly payments at all.
The plan ensures that loan balances will not grow due to unpaid interest as long as borrowers make the required monthly payments. Furthermore, borrowers who qualify may have their loans forgiven in as little as 10 years, compared to the previous 20 or 25 years under income-driven plans.
“We are continuing to pursue an alternative path to deliver student debt relief to as many Americans as possible as quickly as possible,” stated the White House.
The Education Department emphasized that the plan will be critical for low- and middle-income borrowers, community college students, and those working in public service. The White House added that, on average, the plan will cut total lifetime payments in half for black, Hispanic, American Indian, and Alaska Native borrowers.
Recent data shows that student loan balances declined by $35 billion to $1.57 trillion in the second quarter.
(Reporting by Susan Heavey; editing by Jonathan Oatis and Heather Timmons)
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