And after 20 or 25 years, any remaining debt gets erased.Īs part of his debt relief plan announced last year, Biden said his Education Department would create a new income-driven repayment plan that lowers payments even further. If a borrower’s earnings are low enough, their bill is reduced to $0. Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. Those are known as income-driven repayment plans. But if borrowers have difficulty paying that amount, they can enroll in one of four plans that offer lower monthly payments based on income and family size. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. Education Department offers several plans for repaying federal student loans. Estimates from researchers at the University of Pennsylvania put the cost at up to $361 billion.Įmboldened by the Supreme Court's decision on cancellation, some opponents say it’s a matter of time before the repayment plan also faces a legal challenge. The Congressional Budget Office previously estimated over the next decade the plan would cost $230 billion, which would be even higher now that the forgiveness plan has been struck down. Bill Cassidy, the ranking Republican on the Health, Education, Labor, and Pensions Committee, called it “deeply unfair” to the 87% of Americans who don’t have student loans. Republicans have fought against the plan, saying it oversteps the president’s authority. Since the ruling Biden has proposed an alternate approach to cancel debt and also shifted attention to the lesser-known initiative, calling it “the most affordable repayment plan ever.” The typical borrower who enrolls in the plan will save $1,000 a month, he said. But now, after the Supreme Court struck down Biden’s forgiveness plan, the repayment option is taking center stage. It's known as the SAVE Plan, and although it was announced last year, it has mostly been overshadowed by President Joe Biden’s proposal for mass student loan cancellation. And in as little as 10 years, any remaining debt will be canceled. Millions of people will have monthly payments reduced to $0. Interest won’t pile up as long as borrowers make regular payments. Starting this summer, millions of Americans with student loans will be able to enroll in a new repayment plan that offers some of the most lenient terms ever. And it could be the next battleground in the legal fight over student loan relief. WASHINGTON (AP) - The Biden administration calls it a “student loan safety net.” Opponents call it a backdoor attempt to make college free.
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