Biden Administration debuts income-based student debt plan
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Relief for some student loan borrowers as the Biden Administration launched a beta website for its new income driven student loan repayment plan.
This will allow borrowers to begin submitting applications ahead of federal student loan payments resuming in October.
"I've been paying for like five or six years now," University of Texas Rio Grande Valley graduate Juan Barron said. "I graduated back in 2015 with less than $20,000 in debt, and I've been paying ever since."
Now, eight years after graduation, he's brought that down to around $10,000 in federal student loans. He makes enough money to pay bills and pay off his debt, but that hasn't always been the case.
"Obviously, when you graduate, you first get your first job. It's not the best-paying job, at least in my case, it was just a regular part-time job," Barron said.
Like many others, Barron had high hopes for some financial relief when the Biden Administration first announced their efforts.
The Supreme Court struck down President Joe Biden's Student Debt Forgiveness Plan back in June. Now the Save Plan is in place, which stands for saving on a valuable education.
"Some of it takes effect now, some of it takes effect by July 1, 2024. But one of the big things is that it bumps the federal poverty level exclusion from 150 percent of that to 225 percent of that, so there's more income that's going to be excluded and when you have to figure out what your payment is," Director of Government and Lender Relations at Yrefy Jack Wallace said.
The new plan will determine payments based on income and family size, and some monthly payments will be as low as zero dollars.
Wallace says this payment plan is more beneficial than previous plans because it will save borrowers way more money.
"The discretionary income will go from the current 10 percent payment of your discretionary income down to 5 percent unless you have a graduate loan and that'll stay at 10 percent," Wallace said.
With this plan, if you got Pell Grants from a community college and have less than $12,000 in debt, you're only going to have to repay it for 10 years the rest will be forgiven.
"If you have graduate debt it's 25 years, if it's undergraduate debt that's not less than $12,000 that'll be 20 years that you'd have forgiven. So the forgiveness benefits have gotten better," Wallace said.
Another big change under this new plan is the Department of Education is being more lenient when it comes to reporting delinquencies to the credit bureaus.
To access the new beta plan, visit studentaid.gov. The enrollment process can take up to take ten minutes.
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