Along with his plans to grant student loan debt forgiveness to millions of borrowers, President Joe Biden is moving ahead with a plan to lower student loan repayments and stop their balances from growing because of an accumulation of unpaid interest.
On Tuesday morning, Secretary of Education Miguel Cardona announced the Biden administration’s new student loan repayment plans.
Under the proposed changes, student loan borrowers on the Revised Pay As You Earn (REPAYE) plan would offer $0 monthly loan repayments for individual borrowers who make less than about $30,600 annually and for borrowers in a family of four or more that makes less than about $62,400 annually. The plan would also cut monthly payments in half for undergraduate loan borrowers who do not fall under a $0 monthly loan repayment option. Further, the Biden administration plan would stop borrowers’ balances from growing as a result of accumulating unpaid interest, so long as they make their monthly payments.
“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” Cardona said. “We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed. 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.”
The Biden administration announced last August its intent to revise how student loans are repaid, as Biden also announced a plan to cancel up to $20,000 in debt held by Pell Grant recipients and up to $10,000 in debt held by non-Pell Grant recipients earning less than $125,000 a year. Biden laid out a three-part plan that included canceling debts for student loan borrowers, reducing monthly payments, and reducing the costs to attend college in the United States.
The Biden administration is now pursuing these changes to student debt repayment even as his more high-profile move to cancel student debts faces court challenges.
Biden Admin Defends Student Debt Cancellation
The Biden administration’s student debt cancellation plan has been struck down by multiple federal district and appeals courts. The debt cancellation effort is now the subject of two different cases before the U.S. Supreme Court.
The White House has asked [AP citation] the Supreme Court to uphold the plan and reject the two legal challenges. The Biden administration submitted its brief last week, with oral arguments slated for Feb. 28.
The Trump administration paused student loan payments in early 2020, as COVID-19 arrived in the United States. The Biden administration continued to extend this Trump-era pause. In November, amid the ongoing legal disputes, the Biden administration once again extended the moratorium on student loan payments through June 30.
Opponents See $Billion Price Tag
As with opposition to Biden’s debt cancellation plan, opponents point to the costs that will be passed on to taxpayers with this revised student loan repayment plan. The Biden administration estimates the repayment plan would cost nearly $138 billion over the next decade, while some critics have put the true cost closer to $200 billion [AP citation].
The Biden administration believes the student debt cancellation plan will also cost about $30 billion a year over the next 10 years, for a total cost of $300 billion over the next decade.
The conservative Heritage Foundation has also predicted that canceling student debts will lead to colleges increasing their tuition rates because students will have more access to funding.
Even some on the left have questioned the prudence of the idea, saying it’s so generous that it effectively turns student loans into grants that don’t need to be repaid. [AP citation].
The Associated Press contributed to this article.