Biden Administration Delays Student Loan Repayments, Introduces New Relief Programs
In a move to provide much-needed relief to millions of federal student loan borrowers, the Biden administration has announced a year-long delay in student loan repayments. This policy, known as an on-ramp, will begin next month and aims to ease the financial burden on more than 20 million borrowers.
Under the on-ramp program, borrowers will be given a year of leniency before they start making repayments. However, it’s important to note that interest will continue to accrue, starting in September. Despite this, the Department of Education believes that this will provide significant relief to borrowers who have been struggling to make ends meet during these challenging times.
In addition to the on-ramp program, the Department of Education has unveiled a new repayment plan called Saving on a Valuable Education (SAVE). This innovative plan calculates payments based on income and family size, offering a much-needed lifeline to borrowers. The plan aims to decrease the burden of student debt by cutting borrowers’ monthly payments in half. Moreover, some borrowers may even qualify for $0 monthly payments without interest accruing, depending on their circumstances.
Under the SAVE plan, borrowers with undergraduate loans will pay 5% of their discretionary income, while those with both undergraduate and graduate loans will pay a weighted average ranging between 5% and 10% of their incomes. This repayment plan also forgives loan balances after as little as 10 years of payment, instead of the previous 20-year requirement under other income repayment plans.
It is important to note that most federal student loan borrowers will qualify for the SAVE plan, with the exception of those with certain types of loans, such as Direct PLUS loans to parents. While the previous plan proposed by the Biden administration for a one-time cancellation of up to $10,000 in student debt was ruled against by the conservative bloc of the Supreme Court, the new on-ramp policy and SAVE plan are seen as significant steps in the right direction in addressing the ongoing student loan debt crisis.
These new relief measures come at a crucial time, as many borrowers continue to face financial hardships due to the ongoing COVID-19 pandemic. The Biden administration’s commitment to providing support and relief to student loan borrowers is a testament to their dedication to addressing the pressing issue of student debt in our society. It is hoped that these measures will alleviate some of the financial burdens faced by millions of Americans and pave the way for a brighter future for those striving to achieve higher education.