Joe Biden on Student Loans: Will This New Plan Let You Get Out of Paying Back? [2023]
In the new plan for paying back student loans that the Biden administration announced on January 10, more borrowers could see their monthly payments drop to $0. President Biden’s plan to forgive more federal student loans isn’t certain, so the U.S. Department of Education (ED) has proposed changes to income-driven repayment (IDR) plans that could cut loan payments by a lot. Some borrowers will even have zero dollars payments each month.
The Department of Education’s proposed regulations will change the Revised Pay As You Earn Repayment (REPAYE) plan and phase out the three other existing IDR plans available to lower-income debtors: the Pay As You Earn Repayment (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) plans.
Borrowers who are already on the IBR, ICR, or PAYE plans will switch to the new plan when it becomes law, but they will have to sign up through their student loan provider or the Federal Student Aid website. The new proposed regulations don’t change anything to help people who have Parent PLUS loans, which can’t be paid back with an IDR plan.
According to a press release from the ED, borrowers who want $0 monthly payments must make less than about $30,600 a year, and people in families of four must make less than about $62,400.
Student debt repayment will become more reasonable and manageable than ever before because to historic improvements proposed by the Biden-Harris administration today, according to a statement from Miguel Cardona, the U.S. secretary of education.
As Business Insider reported, undergraduates will have their payment obligations slashed in half, as the new plan will revise the required discretionary income payment from 10% to 5%. Those with graduate loans will still have to pay 10%, and those with a mix of graduate and undergraduate loans will have to pay between 5% and 10%.
CNBC says that the current REPAYE plan counts as “discretionary income” any money made over 150% of the federal poverty guidelines. These guidelines are used to see if you are eligible for certain programs and benefits. Under the new rules, borrowers won’t have to make payments based on their income if it’s more than 225 percent of the federal poverty level.
The Biden administration is attempting to correct what it deems is a flawed IDR plan system and a wider problem with never-ending debt payments. If the new REPAYE bill is passed, many people who took out federal student loans of $12,000 would be able to pay them off after 10 years. As it is now, any debt that isn’t paid off after 20 years will be forgiven. This is how the REPAYE plan works.
Federal Student Loan Limits for Borrowing
There are limits on each type of federal student loan based on the year of attendance, the student’s status (dependent or independent), and any other money the student has received for school. Here are the main points:
First-year undergraduate Students can borrow up to $9,500, but they can only get $3,500 in subsidized loans. Students who live on their own can borrow up to $9,500, but they can only get $3,500 in subsidized loans.
Students in their second year of college can borrow up to $10,500, but they can only get $4,500 in subsidized loans. Students who live on their own can borrow up to $10,500, but they can only get $4,500 in subsidized loans.
Undergraduates in their third year and beyond can borrow up to $12,500, with no more than $5,500 in subsidized loans. Students who live independently can borrow up to $7,500, with no more than $5,500 in subsidized loans.
Graduate and professional students can only get $20,500 in loans that aren’t paid back.
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