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Biden Administration Paves the Way for Accessible Student Loan Repayment
Not one to back down from a fight, President Biden, backed by Vice President Harris, continues to champion the cause of student loan debt relief. Their objective remains clear: ensure every hardworking American has access to affordable education, undeterred by the barriers set by the opposing political party.
Today, in response to the Supreme Court ruling, the administration swiftly enacted two strategies aimed at accelerating debt relief for student loan borrowers:
- Launching a rulemaking process by the Secretary of Education to establish an alternative pathway to debt relief for as many working and middle-class borrowers as possible, based on the Secretary’s authority under the Higher Education Act.
- Introducing the most budget-friendly repayment plan yet by the Department of Education, which will be available this summer before loan payments resume. Many borrowers under this plan will be exempt from making monthly payments, while others will enjoy savings of more than $1,000 annually.
12-Month “On-Ramp” to Repayment: A Safety Net for Vulnerable Borrowers
To safeguard the most financially vulnerable borrowers, the Department is implementing a 12-month “on-ramp” to repayment, in effect from October 1, 2023 to September 30, 2024. This mechanism ensures that those who miss payments during this period are not labeled delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.
The Biden-Harris Administration: Making College More Affordable and Loans More Manageable
These initiatives affirm President Biden’s conviction that higher education should be a gateway to the middle class. They build upon a legacy of unprecedented measures taken by the Biden-Harris administration to reduce the cost of college for working and middle-class families and make federal student loans more manageable. Some of these accomplishments include:
- Procuring the most significant increase to Pell Grants in the past decade.
- Rectifying flawed student loan programs like the Public Service Loan Forgiveness, ensuring borrowers receive the relief they deserve.
- Approving over $66 billion in loan cancellations for 2.2 million borrowers across the country, including public service workers and those defrauded by their colleges.
Rapid Debt Relief for Borrowers: A Priority
The President remains dedicated to providing relief to low- and middle-income borrowers. Today, the Department has initiated a rulemaking process that opens an alternative path to debt relief for as many borrowers as possible, leveraging the Secretary of Education’s authority under the Higher Education Act.
Introducing the Saving on a Valuable Education (SAVE) Plan: Reducing Monthly Payments
The Biden-Harris administration has also finalized the most affordable repayment plan to date, known as the Saving on a Valuable Education (SAVE) plan. This income-driven repayment plan will significantly reduce borrowers’ monthly payments, save at least $1,000 per year for all borrowers, and ensure no balances grow due to unpaid interest.
Protection for the Most Vulnerable: Introducing a Temporary “On-Ramp”
The Department is setting up a temporary “on-ramp” to shield the most vulnerable borrowers from severe consequences of late, missed, or partial payments for up to 12 months. Borrowers do not need to take any action to qualify for this on-ramp.
The message is clear: those who can pay should, but this on-ramp period provides borrowers who cannot make payments immediately with the necessary time to adjust, thereby allowing them to eventually meet their monthly payments and fulfill their loan obligations.
Revolutionizing Repayment: Highlights of the SAVE Plan
The new SAVE plan proposes groundbreaking reforms:
- For undergraduate loans, monthly payments will be slashed from 10% to 5% of discretionary income.
- The definition of non-discretionary income, which is exempt from repayment, will be expanded. No borrower earning under 225% of the federal poverty level—approximately equivalent to a $15 minimum wage for a single borrower—will have to make a monthly payment under this plan.
- Loan balances will be forgiven after 10 years of payments, down from 20 years, for borrowers with original loan balances of $12,000 or less. This reform is expected to enable almost all community college borrowers to be debt-free within a decade.
- Borrowers will not be charged with unpaid monthly interest. Unlike other existing income-driven repayment plans, no borrower’s loan balance will increase as long as they make their monthly payments—even if that monthly payment is $0 due to low income.
Every student borrower in repayment will be eligible to enroll in the SAVE plan. Enrollment will open later this summer, before any monthly payments are due. Borrowers already signed up or planning to sign up for the current Revised Pay as You Earn (REPAYE) plan will be automatically enrolled in SAVE once it’s implemented. For more details about the new SAVE plan, visit the Department of Education’s website.
Taking Strides Toward Accessible Higher Education and Sustainable Debt Repayment
Through these reforms, the Biden-Harris administration has shown unwavering commitment to making higher education more accessible and manageable for all Americans. The administration’s actions reflect their firm belief in education as a key to the middle class and their resolve to help millions of Americans manage and overcome student loan debt. These steps are a promising stride toward a future where the dream of higher education is within everyone’s reach, unencumbered by the specter of unmanageable debt.
Source: The White House
