(Reuters ) – On Tuesday, the Biden administration announced a comprehensive revamp of student loan repayment options, aiming to enhance affordability by lowering monthly payment amounts and addressing accumulating interest.
The White House and the Department of Education have announced changes that would result in annual savings of $1,000 for an average borrower and $2,000 for a typical graduate from a four-year U.S. public college or university. They also noted that this plan is open to enrollment for tens of millions of eligible Americans.
President Joe Biden continues to push for broad student debt relief initiatives, despite facing legal setbacks. In June, the U.S. Supreme Court prevented a rule that aimed to erase $430 billion in student loan debt for 43 million borrowers. Additionally, a federal appeals court recently halted a regulation that would have simplified loan forgiveness for students defrauded by for-profit colleges.
During the COVID-19 pandemic, student loan payments were temporarily halted due to the economic disruptions caused by the virus. However, they have since resumed. President Biden, who is running for re-election in November 2024, has prioritized strengthening the nation’s economy as a key part of his domestic agenda.
A new income-driven repayment plan, called the Saving on A Valuable Education (SAVE) plan, was announced recently. This plan reduces the monthly payments for eligible borrowers with undergraduate loans from 10 percent to 5 percent of their discretionary income. Additionally, approximately 1 million more low-income borrowers will now qualify for no monthly payments at all under this plan.
According to a statement from the White House, unpaid interest won’t cause loan balances to increase, provided borrowers meet their monthly payment obligations. Borrowers who qualify could have their loans forgiven in as little as 10 years, a significant reduction from the previous 20 or 25 years under income-driven plans.
The White House expressed its commitment to swiftly delivering student debt relief to as many Americans as possible through an alternative approach.
The Education Department also stated that this plan will be particularly beneficial for low- and middle-income borrowers, community college students, and those in public service. Additionally, it’s expected to halve the total lifetime payments for Black, Hispanic, American Indian, and Alaska Native borrowers, as per the White House.