Biden Administration Unveils New Student Loan Repayment Program

US Secretary of Education

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The United States Department of Education has announced proposed regulations to reduce the cost of federal student loan payments.

Key Takeaways

  • The U.S. Department of Education has introduced new regulations that would reduce monthly payments for undergraduate student loan borrowers.
  • The amendment to the Revised Pay As You Earn (REPAYE) plan includes $0 monthly payments for any individual borrower who makes less than approximately $30,600 annually and any borrower in a family of four who makes less than around $62,400.
  • The proposed regulations were published in the Federal Register, which requires a public comment period that could take several months.

Revised Pay As You Earn (REPAYE) Plan Revision

Yesterday, the Biden-Harris administration introduced regulations that would help students, especially low- and middle-income borrowers, pay down their student loan debt. "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," explained U.S. Secretary of Education Miguel Cardona in an Education Department press release.

President Biden's previous attempts to fulfill one of his biggest campaign promises—wiping out student loan debt—have been met with resistance and legal challenges. In 2022, The Biden administration announced a plan to provide up to $10,000 in federal student loan forgiveness for eligible borrowers, with an additional $10,000 for eligible Pell grant recipients. The administration's student debt relief plan was challenged in two separate lawsuits, which resulted in blocks being placed on the plan's rollout until the current litigation is resolved.

The new plan, which is an amendment to the Revised Pay As You Earn (REPAYE) plan, will offer $0 monthly payments for any individual borrower who makes less than around $30,600 annually and any borrower in a family of four who makes less than approximately $62,400. Additionally, this amendment would cut in half monthly payments on undergraduate loans for borrowers who do not otherwise have a $0 payment in this plan.

What Borrowers Can Expect

An income-driven repayment plan is for borrowers who are experiencing financial distress or who have an income too low for their debt to be affordable. However, if you're currently struggling to make your student loan payments, don't count on these new regulations being approved right away. Months may go by, as the proposal was published in the Federal Register, which requires a public comment period.

However, if it is approved, the new income-driven repayment plan would require buyers to pay just 5%—which is half of the rate charged on the current REPAYE plan—of their discretionary income on loans borrowed for their undergraduate studies. In addition, the Department of Education states that borrowers with the lowest projected lifetime earnings would see their payments reduced by 83%, while those at the top would only see a 5% reduction. In addition, a four-year public university graduate will be able to save up to $2,000 a year, and 85% of community college borrowers would be debt-free within 10 years.

To help struggling borrowers, the Education Department has also proposed automatically enrolling them into the program with the lowest monthly payment, based on income information from the Internal Revenue Service.

Article Sources
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  1. U.S. Department of Education. "New Proposed Regulations Would Transform Income-Driven Repayment by Cutting Undergraduate Loan Payments in Half and Preventing Unpaid Interest Accumulation."

  2. The White House. "Fact Sheet: President Biden Announces Student Loan Relief for Borrowers Who Need It Most."

  3. U.S. Department of Education. "Fact Sheet: Transforming Income-Driven Repayment."