https://www.huffpost.com/entry/biden-student-loans_n_63bd417fe4b0b2e1506ad660
Biden Administration Proposes 'Student Loan Safety Net' Alongside Debt
Forgiveness
The White House is moving forward with a proposal that would lower student
debt payments for millions of Americans now and in the future.
Jan 10, 2023
WASHINGTON (AP) — The White House is moving forward with a proposal that
would lower student debt payments for millions of Americans now and in the
future, offering a new route to repay federal loans under far more generous
terms.
President Joe Biden <https://www.huffpost.com/news/topic/joe-biden> announced
the repayment plan in August, but it was overshadowed by his sweeping plan to
slash or eliminate student debt
<https://apnews.com/article/student-loan-forgiveness-biden-plan-d9c8e18774a744187c9af634bf4eb728>
for 40 million Americans. Despite the low profile of the payment plan,
however, some education experts see it as a more powerful tool to make
college affordable, especially for those with lower incomes.
Education Department officials on Tuesday called the new plan a “student loan
safety net” that will prevent borrowers from getting overloaded with debt.
“Student debt has become a dream killer,” Education Secretary Miguel Cardona
said. “This is a promise to the American people that, at long last, we will
fix a broken system and make student loans affordable.”
Biden, a Democrat, is moving forward with the repayment plan even as his
one-time debt cancellation faces an uncertain fate before the Supreme Court
<https://apnews.com/article/supreme-court-student-loan-cancellation-79f7530363c7f15166d8c9cda3a6cddb>.
The White House has asked the court to uphold the plan and reject two legal
challenges from conservative opponents. The Biden administration submitted
its brief last week, with oral arguments slated for Feb. 28.
The Education Department formally proposed the new repayment plan on Tuesday
by publishing it in the Federal Register, starting a public comment period
that often takes months to navigate.
If it’s finalized, the proposal would give a major overhaul to income-driven
repayment plans — one of several payment options offered by the federal
government. The resulting plan would have lower monthly payments, an easier
path to forgiveness and a promise that unpaid interest will not be added to a
borrower’s loan balance.
The federal government now offers four types of income-driven plans, but the
proposal would mostly phase out three of them while focusing on one
simplified option, scaling back the confusing array of options borrowers now
face.
Under existing plans, monthly payments are capped at 10% of a borrower’s
discretionary income, and those earning less than $20,400 a year aren’t
required to make payments. The new proposal would cap payments for
undergraduate loans at 5% of borrowers’ pay, cutting their bills in half, and
require payments only for those who earn more than about $30,000 a year.
As long as borrowers make their monthly payments, any unpaid interest would
not be charged. The change is meant to prevent borrowers from having unpaid
interest added to their loan balance, a practice that can cause debt to
snowball even as borrowers make payments.
Significantly, the proposal would also make it easier to get debt erased
after making several years of payments. Existing plans promise to cancel any
remaining debt after 20 or 25 years of payments. The new plan would erase all
remaining debt after 10 years for those who took out $12,000 or less in
loans. For every $1,000 borrowed beyond that, a year would be added.
Typical graduates of a four-year university would save about $2,000 a year
compared with today’s plans, the Biden administration says, while 85% of
community college borrowers would be debt-free within 10 years.
Supporters see the proposal as a significant stride toward college
affordability. Some say it’s so generous that it approaches free community
college — a campaign promise that Biden has pushed but failed to deliver.
Opponents on the right blast the revamped plan as an unfair handout with a
steep price tag. The Biden administration estimates the repayment plan would
cost nearly $138 billion over the decade, and some critics have put it closer
to $200 billion.
Even some on the left have questioned the prudence of the idea, saying it’s
so generous that it effectively turns student loans into grants that don’t
need to be repaid. That could lead more students to borrow, they warn, and it
could spur colleges to raise tuition prices if they know students won’t be on
the hook.
Still others have urged the administration to abandon income-driven payment
plans entirely, calling them a failed policy. Critics cite a federal report
from last year
<https://apnews.com/article/business-education-6ce97ddc9db7f777e8e6fb2d7a8fb2cd>
finding that sloppy oversight of the program left thousands of borrowers
stuck with debt that should have been forgiven.
Cardona said his agency is working on other proposals that would hold
colleges accountable if their students get overburdened with debt. One idea
promoted by Biden is to warn the public about programs that leave graduates
saddled with debt.
The Education Department on Tuesday began the process to deliver that goal,
asking the public about the best way to identify “low-value” programs.