4 Ways Biden’s New Student Loan Repayment Plan Could Help Borrowers

"Student loan forgiveness has captured the attention of millions of Americans, as they wait to see how the Supreme Court will rule on the Biden Administration’s plan to forgive up to $20,000 of federal debt per borrower," Money reports.

"But while loan forgiveness has been in the spotlight, many student borrower advocates are also waiting on details on a separate overhaul tucked into the White House’s three-part debt relief plan. The proposed — and much less talked about — new income-driven repayment plan could provide help to millions of low- and middle-income student loan borrowers.

'Debt forgiveness is taking up a lot of space right now in the conversation,' says Jill Desjean, senior policy analyst for the National Association of Student Financial Aid Administrators (NASFAA). 'It’s not shocking that would take priority in the media over this more subtle change.'"

..."One big change under this potential new IDR plan is that more of a borrower’s income will be shielded from the formula that determines how much the borrower owes each month.

Payments under income-driven repayment plans are based on the borrower’s “discretionary income.” Right now, most of the IDR plans define that as the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.

'So if you earn less than that amount, your payment is zero,' Desjean says. If you earn more, your payments could still be significantly lower than they would be under the standard 10-year repayment plan.

This new proposed plan would raise the amount of income that’s considered non-discretionary by increasing the threshold to 225% of the federal poverty level. For a single borrower, that’s equal to a salary of about $30,558 this year — or roughly the equivalent of a $15 an hour job, according to the administration.

'By extending that protected income up to 225% of the federal poverty guideline, you’re going to be capturing more people who are still really relatively low-income into that $0 monthly payment amount,' Desjean says."

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented. 


Publication Date: 12/8/2022

View Desktop Version