The Biden Administration will continue its student loan repayment plan as its one-time debt cancellation plan faces uncertainty.
The latest initiative will reduce monthly payments, interest rates and the duration of repayment for borrowers, according to the Associated Press.
Under the administration’s new plan, monthly payments on loans would cap at 5% of the borrower’s income for borrowers who earn more than $30,000 a year. Unpaid interest wouldn’t be added to the borrower’s remaining balance as long as they pay their monthly payments.
After 10 years, remaining loan debt would be erased for those who took out $12,000 or less in loans. However, a year would be added for every $1,000 borrowed beyond that.
The administration announced both plans in August 2022; however, the one-time cancellation plan received more attention.
Now that this plan is waiting for Supreme Court review on its legality, the administration has shifted its focus to the repayment plan. The Department of Education formally proposed the repayment plan Tuesday by publishing it to the Federal Registrar and allowing for a public comment period.
The plan will cost the federal government $138 billion over the next 10 years, according to the Associated Press.
Supporters of the administration’s new plan believe this repayment plan is a step toward college affordability, as it presents long-term benefits for loan borrowers, rather than a one-time student loan cancellation.
Biden’s one-time student loan cancellation plan entailed a $20,000 debt cancellation for borrowers who make less than $125,000 annually and received Pell Grant, as well as $10,000 for borrowers who make less than 125,000 annually and did not receive Pell Grant.
The administration made a case for the constitutionality of the plan, citing the 2003 Higher Education Relief Opportunities for Students Act guidelines, a policy measure granting the Secretary of Education the ability to alter financial aid program regulations in national emergencies.
A lawsuit was filed against the Biden Administration due to his cancellation plan by six states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — on the basis that the administration’s actions were an overreach and harmful against loan providers. The lawsuit was dismissed by a federal judge; though, an appeal blocked the program until a Supreme Court review in February.
The Supreme Court will hear arguments in late February or March to assess whether the repayment plan is legal.
Contact Naomi at email@example.com. Follow her on Twitter @volcyn_.
Naomi Volcy is a third-year journalism major and the university general assignment reporter for The Alligator. Previously, she was an Avenue staff writer. In her spare time, she enjoys reading mangas, listening to R&B or Indie Rock and dressing up.