January 10, 2023

The Department of Education released long-awaited details on a piece of President Biden’s student loan debt plan that would enable millions of borrowers to cut their monthly federal payments by more than half. Via the New York Times:

The Education Department’s proposed rules would revise one of its existing income-driven repayment plans — known as REPAYE — in which borrowers’ monthly payments are tied to their income and family size, and after a set number of years, any remaining debt is forgiven.

Unlike Mr. Biden’s one-time debt cancellation initiative, the new repayment plan would become a permanent fixture of the student loan infrastructure and apply to current and future borrowers.

The latest iteration of REPAYE will be the most affordable of the five existing plans, the first of which became available in 1995. Like the others, it doesn’t do anything to slow the rising cost of higher education, instead providing a new way to cope.

Here's probably the most popular part of the proposal:

Finally, unlike other existing income-driven plans, borrowers’ loan balances will not grow as long as they make their monthly payments, even when they are not required to make any payments because their income is too low.

That will be a huge relief to borrowers who diligently make payments yet still see their balances balloon over the decades because they’re not paying enough to cover the interest owed.

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