New Biden Student Loan Plan Reduces Payments for Millions, According to White House

WASHINGTON (Reuters) – On Tuesday, the Biden administration announced significant changes to student loan repayment plans aimed at making payments more manageable for borrowers by decreasing monthly obligations and minimizing unpaid interest.

These adjustments are projected to save the average borrower about $1,000 annually and $2,000 for graduates of typical four-year public colleges, according to the White House and the Department of Education. They indicated that millions of Americans will qualify for enrollment in the new plan.

President Joe Biden is actively working on extensive student debt relief measures, even as certain elements of his strategy face legal challenges. Earlier this year, the U.S. Supreme Court blocked a measure intended to cancel $430 billion in student debt for 43 million borrowers. Additionally, a federal appeals court recently halted a rule designed to simplify the loan forgiveness process for students who were defrauded by for-profit institutions.

During the COVID-19 pandemic, student loan payments were suspended due to the economic disruptions caused by the pandemic. However, payments have now resumed. As Biden prepares for a potential second term in the upcoming November 2024 election, he has prioritized strengthening the economy as a key aspect of his domestic policy.

The newly introduced Saving on A Valuable Education (SAVE) income-driven repayment plan will reduce the monthly payment for eligible borrowers on undergraduate loans from 10 percent to 5 percent of their discretionary income. Additionally, around 1 million more low-income borrowers will now qualify for zero monthly payments.

The revised plan also stipulates that loan balances will not increase due to unpaid interest, as long as borrowers meet the required monthly payments. Qualifying borrowers could see their loans forgiven in as little as 10 years, a significant reduction from the previous 20 or 25-year terms.

The White House emphasized its commitment to finding alternative pathways to provide student debt relief to as many Americans as swiftly as possible.

The Education Department highlighted that this plan will be crucial for low- and middle-income borrowers, community college attendees, and those engaged in public service roles. On average, this initiative is expected to reduce total lifetime payments by half for Black, Hispanic, American Indian, and Alaska Native borrowers.

Recent data indicated a decline in student loan balances, dropping by $35 billion to a total of $1.57 trillion in the second quarter.