(VitalNews.org) – On August 24, 2022, President Joe Biden announced his plans to offer student loan forgiveness to a significant portion of those holding academic debts. As long as the borrower had the right kind of loan and was below a certain income threshold, a portion of their loan would disappear — or so he thought. Following a number of lawsuits against the move, the program was put on hold and now sits in front of the US Supreme Court, which may potentially decide its fate. In the meantime, the Biden administration has another plan in mind to offer help to those who carry student debt.
The Announcement
On January 10, the US Secretary of Education Miguel Cardona released a statement regarding another way the administration planned to help student loan borrowers. While the future of forgiveness still remains a mystery, the secretary said the administration would like to tackle the existing repayment structure. He said the plan would help to make monthly obligations more affordable. Those who have outstanding loans from an undergraduate program could possibly cut their payments in half and open up quicker avenues toward forgiveness — as long as they qualify.
Although this new initiative could help about eight million people, Forbes reported benefit will likely be unevenly distributed among those who owe student debt.
The Committee for a Responsible Federal Budget called the new plan pricey and “flawed,” saying it could lead to increased tuition prices going forward and cause more Americans to borrow money for their college education.
Plan Reimagined
The proposal simply changes an already-existing repayment structure. Originally, the REPAYE program determined how much a borrower would pay based on the person’s discretionary income. That number was determined by calculating 10% of the amount above 150% of the former student’s adjusted gross income (AGI). The new plan would increase the AGI threshold to 225% and reduce the monthly obligation calculation to 5%, essentially cutting payments in half.
However, the new proposal would only apply to undergraduate student loans. Graduate students with federal loans would still have to pay 10% of discretionary income for their monthly obligation. However, the AGI threshold would still increase to 225%, so those fitting into this bracket could still find some relief. That said, those with a graduate loan could still benefit from the portion of money they borrowed for their undergraduate degrees.
If the proposal goes through, forgiveness could change as well, as the Education Department’s plan would alter eligibility timelines.
According to CBS News, the agency plans to iron out the entire plan later this year and should start implementing the changes within the same timeframe.
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