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NextGen Magazine


Biden Administration Proposes New Regulations to Lower Cost of Student Loan Repayments

S.J. Steinhardt
Published Date:
Jan 10, 2023


Student-loan holders would be able to pay down their debt using income-driven repayment plans under regulations proposed by the U.S. Department of Education (DOE).

According to the DOE, the proposed regulations, an overhaul of the student loan forgiveness program announced by President Joe Biden in August,  would “create the most affordable income-driven repayment (IDR) plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers' progress toward forgiveness.” They are intended to "reduce the cost of federal student loan payments, especially for low and middle-income borrowers."

“The proposed regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400,” the announcement read. “The regulations would also cut in half monthly payments on undergraduate loans for borrowers who do not otherwise have a $0 payment in this plan. The proposed regulations would also ensure that borrowers stop seeing their balances grow due to the accumulation of unpaid interest after making their monthly payments.”

The DOE estimated that the effects of the proposed IDR Plan, compared to the existing REPAYE plan, would be as follows:

• Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40 percent. Borrowers with the lowest projected lifetime earnings would see payments that are 83 percent less, while those in the top would see only a 5 percent reduction.

• A typical graduate of a four-year public university would save nearly $2,000 a year relative to the current REPAYE plan.

• A first-year teacher with a bachelor's degree would save more than $17,000 in total payments while pursuing Public Service Loan Forgiveness—a two-thirds reduction in what the teacher would pay in total under REPAYE. 

• 85 percent of community college borrowers would be debt-free within 10 years.

• On average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half.

“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before," said U.S. Secretary of Education Miguel Cardona. "We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed. These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.”