WASHINGTON (AP) — The White House is pushing a proposal to cut student loan payments for millions of current and future Americans, opening up new routes to repaying federal loans on far more generous terms. It offers.
President Joe Biden announced a repayment plan in August, A drastic plan to reduce or eliminate student debt For 40 million Americans. But while this payment plan is low profile, some education experts see it as a stronger tool to make college affordable, especially for low-income earners.
Education Department officials on Tuesday called the new plan a “student loan safety net” to prevent borrowers from becoming insolvent.
“Student loans have become a dream killer,” said Education Secretary Miguel Cardona. “This is a promise to the American people to finally fix a broken system and make student loans affordable.”
Democrat Biden moves forward with repayment plan despite face of one-off debt forgiveness An uncertain fate on the Supreme CourtThe White House asked the court to uphold the plan and dismiss two legal challenges from conservative opponents. The Biden administration submitted briefs last week, and oral arguments are scheduled for February 28.
The Department of Education formally proposed a new repayment plan on Tuesday, publishing it in the Federal Register and beginning a public comment period that often takes months to navigate.
If finalized, the proposal would significantly overhaul income-driven repayment plans, one of several payment options offered by the federal government. The resulting plan will result in lower monthly payments, an easier path to forgiveness, and the promise that unpaid interest will not be added to the borrower’s loan balance.
While the federal government currently offers four income-driven plans, this proposal would reduce the array of complex options currently faced by borrowers and focus on one simplified option. However, we plan to phase out three of them.
Under existing plans, monthly payments are limited to 10% of the borrower’s disposable income, and those with annual incomes below $20,400 do not have to pay. The new proposal would limit undergraduate loan payments to 5% of a borrower’s salary, cut billings in half, and require payment only from those earning about $30,000 or more a year.
No outstanding interest will be charged as long as the borrower makes the monthly payments. This change is intended to prevent borrowers from adding unpaid interest to their loan balances. This is a practice that can snowball debt even as borrowers make payments.
Importantly, the proposal also makes it easier to write off the debt after making several years of payments. Existing plans promise to write off the remaining debt after 20 or 25 years of payments. The new plan will eliminate all remaining debt for anyone who borrows $12,000 or less after ten years of her life. For every $1,000 borrowed beyond that, one year is added.
According to the Biden administration, a typical four-year college grad will save about $2,000 a year compared to current plans, and 85% of community college borrowers will be debt free within 10 years.
Proponents see the proposal as a major step toward college affordability. Free Community Some say he is more generous the closer he gets to college. This was a campaign promise promoted by Biden, but failed to materialize.
Right-wing opponents denounce the revised plan as an unfair handout with a high price tag. The Biden administration estimates that the repayment plan will cost him nearly $138 billion over his decade, with some critics saying it will cost him nearly $200 billion.
Even some on the left have questioned the wisdom of the idea, saying it’s so generous that it’s effectively turning student loans into grants that don’t have to be repaid. They warn that this could lead to more students going into debt, and that universities could raise tuition fees if students know it won’t be a problem.
Additionally, some are calling the administration a failed policy, urging the administration to abandon income-driven payment plans altogether.critic quotes last year’s federal report It turns out that the program’s lax oversight left thousands of borrowers in debt that should have been forgiven.
Cardona said his institution is working on other proposals to hold universities accountable if students become overburdened with debt. , to warn the public about programs that put graduates in debt.
The Department of Education on Tuesday began a process to reach that goal, asking the public how best to identify “low-value” programs.
The Associated Press education team is supported by the Carnegie Corporation of New York. AP is solely responsible for all content.