United States President Joe Biden and his administration are moving forward with a proposal that could reduce the monthly payments on educational debt for American students. This would benefit millions of borrowers in the country.
This plan is not substituting the debt forgiveness the president proposed back in August of last year, although that proposal is currently blocked, per AP News.
According to the same outlet, Department of Education officials call this repayment plan the "student loan safety net," which experts see as a useful tool that could make college affordable for all Americans.
If approved, this new plan would give debtors the advantage of having lower monthly payments, it would be easier to apply for debt forgiveness, and unpaid interests will not be added to the borrower’s loan balance.
Currently, the U.S. government offers four different types of income-driven payment plans, but this proposal would focus on only one simplified option, AP News reported.
Under the existing Revised Pay As You Earn Repayment Plan, also known as REPAYE, payments are recalculated each year depending on the borrower's income and family size. This results in a monthly payment of no more than 10% of the loaner's income, and loans can be forgiven in full after 20 or 25 years. The recent Biden administration proposal, however, aims to eliminate student debt after ten years for those who owe $12,000 or less.
Additionally, this proposal would save those graduates from a four-year college total of around $2,000 compared with the existing plans.
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