Biden introduces fresh student loan repayment plan post Supreme Court denial.
The Biden Administration Introduces Income-Driven Student Loan Repayment Plan
The Biden administration has confirmed the rollout of an income-driven student loan repayment plan for borrowers, just before loan repayments are set to resume in the fall.
President Joe Biden, alongside Education Secretary Miguel Cardona and other administration members, announced the SAVE plan. Under this program, borrowers earning around $15 per hour will be exempt from making any payments. Those earning above this threshold will save approximately $1,000 annually compared to other repayment plans, according to the Department of Education.
“Borrowers applying for the SAVE plan will see their new payment amount before submitting their application, and it will be displayed on their servicer’s website when their first bill is sent. Most borrowers who apply for the SAVE plan in the coming days can expect to have their new monthly payment amount for their first payment in October,”
The Department of Education stated that it will directly communicate with approximately 30 million student loan holders in the following days to encourage them to apply for the plan using the new application. The application process takes about 10 minutes to complete and allows borrowers to securely access their income information from the Internal Revenue Service, which will be automatically recertified every year.
President Biden emphasized in a video released by the White House that as long as borrowers pay what they owe under this plan, their loan balance will no longer accumulate unpaid interest. Monthly payments under the SAVE Plan are based on income rather than the loan balance.
Interest on federal student loans will resume on September 1, and the Education Department will begin collecting monthly payments from borrowers in October.
Opposition and Concerns
Opponents of the plan argue that it unfairly benefits those who do not need it, placing a heavy burden on taxpayers who have already repaid their loans or did not attend college. Some worry that it may incentivize colleges to raise tuition prices, knowing that many students will have their loans canceled in the future.
Critics claim that the plan resembles a form of free college, despite President Biden’s failed campaign promise to make community college free. They argue that the new plan is an attempt to achieve a similar outcome without congressional approval.
Republicans have strongly opposed the plan, asserting that it exceeds the president’s authority. Sen. Bill Cassidy (R-La.), the ranking Republican on the Health, Education, Labor, and Pensions Committee, described it as “deeply unfair” to the 87 percent of Americans without student loans.
Meanwhile, a watchdog group has estimated that the program will cost taxpayers at least $276 billion. The Committee for a Responsible Federal Budget’s report suggests that the new repayment options will lead to a 12 percent annual increase in borrowing due to higher tuition. It also highlights concerns about the program supporting low-quality and low-value programs, as those with the highest debt-earnings ratios receive the largest subsidy.
The introduction of this income-driven student loan repayment plan has sparked intense debate and raised questions about its long-term implications.
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