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.
Interest won’t pile up as long as borrowers make regular payments. Millions of people will have monthly payments reduced to $0. And in as little as 10 years, any remaining debt will be canceled.
Republicans have fought against the plan, saying it oversteps the president’s authority. Sen. 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. Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased. announced last year, Biden said his Education Department would create a new income-driven repayment plan that lowers payments even further. It became known as the SAVE Plan, and it’s generally intended to replace existing income-driven plans.
Next July will also bring a quicker road to loan forgiveness. Starting then, borrowers with initial balances of $12,000 or less will get the remainder of their loans canceled after 10 years of payments. For each $1,000 borrowed beyond that, the cancellation will come after an additional year of payments.
Opponents call it an unfair perk for those who don’t need it, saying it passes a heavy cost onto taxpayers who already repaid student loans or didn’t go to college. Some worry that it will give colleges incentive to raise tuition prices higher since they know many students will get their loans canceled later.
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