Following months of speculation about what President Joe Biden’s student loan forgiveness would look like, the President has finally released a plan.
In a statement, Biden touted keeping his campaign promise while lauding his plan would “give working and middle-class families breathing room.”
But, Biden’s statement concludes with the most significant information: his administration will “resume federal student loan payments in January 2023.”
This is what the President’s student loan forgiveness entails:
$10,000 federal student loan forgiveness for borrowers making less than $125,000 annually
Up to $20,000 loan forgiveness for student borrowers who make less than $125,000 a year and received Pell Grants
But Biden’s plans include more than a lower student loan debt balance for 7 million eligible Pell Grant recipients or the 15 million estimated to be eligible for the federal student loan forgiveness. The President has also extended the repayment extension and proposes a different repayment structure going forward.
Student Loan Repayment Extension
The Biden Administration has extended the federal moratorium on student loan repayments for the sixth and final time, resuming payments in January 2023.
Proposal to Rework Income-Driven Repayments
The Education Department proposes that middle and lower-income borrowers’ income-driven repayments be decreased from 10 percent of discretionary income to 5 percent of discretionary income.
The proposal suggests the amount considered non-discretionary be raised, protecting borrowers from higher payments and that borrowers’ loan balances don’t increase if they pay the required monthly payments.
The new rule, if implemented, would apply to borrowers with undergraduate and graduate degrees.
A Proposal to Address College Accountability
The Education Department is also proposing that a rule to hold colleges and career programs accountable be reinstated. Colleges — like DeVry University, charged with defrauding 1,800 students after making unsubstantiated claims of job placement rates — would be targeted by these changes, which include appearing on a publicly available watch list.