The changes are part of proposed regulations to lower the cost of federal student loan repayments and the Biden administration’s overall plans for student debt relief. Comments are due Feb. 10.
01/17/2023 11:45 A.M.
3.5 minute read
The Biden administration is moving forward with student loan debt relief in a new proposal to improve affordability of income-driven repayment plans for student loan borrowers, simplify the program and remove components that cause delays in loan forgiveness.
“The proposed regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400,” according to a news release from the Department of Education (DOE).
The DOE also proposes to cut monthly payments on undergraduate loans in half for “borrowers who do not otherwise have a $0 payment in this plan,” and to eliminate interest after borrowers make their monthly payments.
The DOE estimates the plan changes would have these impacts on borrowers compared to the existing income-driven repayment plan:
- Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40%. Borrowers with the lowest projected lifetime earnings would see payments that are 83% less, while those in the top would only see a 5% reduction.
- A typical graduate of a four-year public university would save nearly $2,000 a year relative to the current plan.
- A first-year teacher with a bachelor’s degree would save more than $17,000 in total payments while pursuing Public Service Loan Forgiveness—a two-thirds reduction in what they would pay in total under the current plan.
- 85% of community college borrowers would be debt-free within 10 years.
- On average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half.
The proposed regulations are available for comment on the Federal Register tomorrow and comments are due Feb. 10, 2023. The DOE expects the rule will be finalized and ready for partial implementation later this year, depending on changes made in response to public comments.
Student Loan Forgiveness in the Courts
Meanwhile, other student loan forgiveness plans from the DOE are on hold due to challenges in courts across the U.S. Two of those cases have escalated to the U.S. Supreme Court, which will begin considering the cases in February, ACA International previously reported.
Here’s the breakdown of these two cases and where they currently stand:
Biden v. Nebraska
A group of six Republican-led states challenged the student loan forgiveness plan, claiming the loss of tax income and other revenues from state organizations’ business dealings with some loan servicers would cause their economies to suffer, ACA previously reported.
The case from the 8th Circuit Court of Appeals will now be reviewed by the U.S. Supreme Court.
The 8th Circuit issued a temporary injunction in November to halt the program until the legality of the debt relief is decided. The Supreme Court said in December it would hear the case, putting the program on hold until then, ACA previously reported.
Department of Education v. Brown
In this case brought by two individuals, backed by the Jobs Creators Network Foundation, a Texas district judge ruled in the complaint that Biden lacked the authority to establish the student debt relief program.
In November, the 5th Circuit Court of Appeals maintained the district court’s decision, and in December, the Supreme Court said it would review the case on its merits, according to The Hill.
The Supreme Court will hear oral arguments in the cases on Feb. 28.
Several other cases in courts across the U.S. are on the books challenging the student loan forgiveness plan, but those in the appeals process in the 5th and 8th Circuits carry the most weight at this time, ACA previously reported.
The DOE has extended the pause on student loan repayment, interest, and collections through June 30, 2023, ACA previously reported.
The DOE reports that borrowers can use the continued payment pause to make sure their contact information is correct with student loan servicers and consider signing up for electronic debit and income-driven repayment plans.
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