While President Joe Biden’s student loan forgiveness program promising up to $20,000 in one-time debt relief for low- and middle-income borrowers is tied up in the courts, the Department of Education is working on a new repayment plan that has the potential to significantly help both current and future borrowers.
For many federal student loan borrowers, the lesser-known plan, which Biden first announced in August, would not only reduce their monthly payments but also lower the total amount they pay back over time.
Plus, the proposed repayment plan is less likely to face the legal challenges that have stalled Biden’s broad forgiveness program.
Even if the one-time loan forgiveness program is ultimately rejected by the Supreme Court – which will hear arguments in two cases on February 28 – the new loan repayment plan could offer a benefit that’s even more generous for some borrowers.
“This pending change to federal student loans has the potential to be more significant in the long run than President Biden’s broad-based forgiveness plan that is now on hold by the courts,” reads a report published by the Urban Institute, a research nonprofit.
The Department of Education expects to start implementing some parts of the new income-driven repayment plan later this year. But first, the proposal is currently going through a formal rulemaking process, having received more than 13,000 public comments, and changes may be made to the proposal before it takes effect.
Biden’s forgiveness program, if allowed to move forward, would grant a one-time federal student loan cancellation to individual borrowers who make less than $125,000 a year and households who make less than $250,000 annually. Up to $10,000 would be canceled for qualifying borrowers and another $10,000 of forgiveness would go to those who also received a Pell grant while…
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