The United States Department of Education (DOE) proposed a regulation Tuesday morning to revise student loan repayment plans to reflect borrowers’ income.
The plan intends to reduce student loan repayments for the middle and lower class by amending the Revised Pay As You Earn (REPAYE) plan, which “is a repayment plan with monthly payments that are generally equal to 10% of your discretionary income, divided by 12,” according to its website. The proposal would permit individual borrowers who earn less than $30,600 per year and any borrower in a family of four who makes less than $62,400 to choose a $0 monthly plan, Tuesday’s announcement read. (RELATED: Supreme Court Agrees To Hear Second Challenge To Biden’s Student Loan Plan)
The proposal would cut in half the monthly payments for undergraduate borrowers who would not qualify for the $0 monthly plan and would stop borrowers’ balances from increasing due to unpaid interest.
“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” U.S. Secretary of Education Miguel Cardona said in the announcement. “We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed. These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.”
The DOE predicts that its income-driven plan will “reduce monthly debt burdens and lifetime payments” for the low and middle class as the lowest lifetime earning borrowers could pay 83% less in total payments per dollar while top earners could pay 5% less. It also predicted that the average four-year graduate of a public university would save approximately $2,000 a year.
It further predicts that 85% of community college borrowers could be debt-free within 10 years under the proposed plan.
The proposal comes on the heels of the Biden administration’s attempt to cancel up to $20,000 in student loan debt last August. The plan, which will be heard before the Supreme Court this term, would have canceled $20,000 in debt for borrowers who received Pell Grants and $10,000 for those who did not.
The plan applied to borrowers who earned less than $125,000 per year and was expected to impact 40 million borrowers. A Texas federal judge blocked the plan in November, and the U.S. Eighth Circuit Court of Appeals issued a nationwide halt to the plan soon after in response to a lawsuit filed by several states against it.
In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.
I’ll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
The proposed regulation will be published in the Federal Register tomorrow and open to public comments for 30 days, according to the announcement. The DOE intends to finalize and implement the proposal later this year.
The DOE did not immediately respond to the Daily Caller News Foundation’s request for comment.
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