With the Supreme Court set to hear arguments on President Joe Biden’s student loan forgiveness policy, the administration offered up a safety net Tuesday, which would require smaller minimum payments from borrowers and seeks to keep interest accrual in check.
The proposed regulations would also ensure that borrowers stop seeing their balances grow due to the accumulation of unpaid interest after making their monthly payments.
Secretary of Education Miguel Cardona, in a press release, said the “historic changes” would make student loan repayment more affordable and manageable.
“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,” Cardona said.
The proposed regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer zero monthly payments for any individual borrower who makes less than $30,600 annually and any borrower in a family of four who earns less than $62,400.
Beyond student loan relief, the Biden administration is committed to ensuring postsecondary institutions and programs are held accountable if they leave borrowers with unaffordable debts, the press release states.
The Education Department is also taking steps today to publish a list of programs at all U.S. colleges and universities that provide the least financial value to students, the press release states.
According to the Education Department, the proposed amended payment plan should have the following impacts:
- Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40%. Borrowers with the lowest projected lifetime earnings would see payments that are 83% less, while those in the top would only see a 5% reduction.
- A typical graduate of a four-year public university would save nearly $2,000 a year relative to the current REPAYE plan.
- 85% of community college borrowers would be debt-free within 10 years
The proposed regulations will be published in the Federal Register this week. The Education Department expects to finalize the rules and intends to start implementing some provisions later this year, subject to any changes made based on public comments, the press release states.
Meanwhile, the Biden administration is preparing for a hearing before the Supreme Court during its February 2023 session on the student loan forgiveness initiative.
Last fall, Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina filed a lawsuit in Eastern Missouri U.S. District Court challenging the forgiveness program, asserting that it violates the separation of powers and Administrative Procedures Act.
Since then, the plan has been blocked by two federal courts of appeal. In early December, the Supreme Court granted certiorari, which means it will hear oral arguments in the case, Biden v. Nebraska, during its upcoming session.
The forgiveness plan seeks to relieve $10,000 of federal student loan debt for borrowers who are earning less than $125,000 and up to $20,000 for those who went to college on Pell grants.