5.5M Borrowers in Biden's Loan Plan

Explore the Biden administration's new student loan repayment plan, now offered to nearly 5.5 million borrowers. This initiative aims to ease financial burdens with lower monthly payments and capped interest accrual. Discover how around 2.9 million enrollees won't make payments this year due to low income. Stay tuned for enrollment figures and upcoming news that may impact the program's future.

Key takeaways

• The new income-driven repayment plan has enrolled nearly 5.5 million borrowers, showcasing a high demand for student debt relief
• Many enrollees won't have to make payments this year, demonstrating the plan's effect on low-income borrowers
• Legislative challenges could shake up the future of the plan, with potential repeals on the horizon

New student loan repayment plan enrolls millions

Over 5.5 million people signed up for Biden’s new student loan repayment plan. The goal is to make things easier by reducing monthly payments and limiting how much interest can accrue on the debt.

Understanding the effects on borrowers

Borrowers will be able to benefit in a few different ways. Let’s dive into some of them:

• No monthly payments for some people: approximately 2.9 million people enrolled don’t have to make payments this year due to having low income.
• Enrollment spikes: Around 1.8 million net new people enrolled in the past few months, while others transitioned from the previous version of the plan.
• Pell Grant recipients: 75% of those in the plan had previously received a Pell Grant, signaling support for students in financial need.

Legislative challenges ahead

The House and Senate have voted on whether to cancel this particular income-driven repayment plan (the SAVE plan). While the House voted to overturn the program, the initiative to block the SAVE plan failed in the Senate. Senate Republicans, along with some Democrats, challenged the SAVE plan, claiming that it is a backdoor to providing the student loan relief the White House originally tried to pass.

Balance between relief and costs

When thinking about helping with student loans, we need to consider the balance between providing relief and the costs involved. The SAVE (Saving on a Valuable Education)plan aims to reduce payments, limit interest growth, and create a path for loan forgiveness.

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It's the most aggressive income-driven repayment plan so far, allowing borrowers to pay only 5% of their income (as opposed to 10-15%), along with similar forgiveness mechanisms. But, some Republicans are against it, saying it's canceling debt indirectly and is expensive for taxpayers.

The cost estimates also vary a lot—Biden's team thinks it'll cost $156 billion over 10 years, while others say it could be as high as $475 billion. It's a big discussion about finding the right solution for borrowers without making things too costly for everyone else

Enrollment figures and future votes

The Biden-Harris Administration says around 5.5 million people are now part of the Saving on a Valuable Education (SAVE) Plan. Among them, 2.9 million don't have to pay anything this year. The Education Department mentioned that these 5.5 million borrowers make up about $300 billion of the total $1.6 trillion federal student loan debt.

As of November 8, 2023, both the House and Senate were getting ready to vote on a resolution to overturn the program in the next few weeks. The House Education Committee has already given the green light to the legislation (H.J. Res. 88), moving it for a full house vote; the House voted to repeal the act in December 2023. However, the Senate rejected the effort to kill the policy.

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Frequently asked questions (FAQ)

Who qualifies for the new student loan repayment plan?

Most federal student loan borrowers qualify for the new student loan repayment plan. Borrowers with incomes above the minimum threshold will have to pay 5% of their discretionary income each month on their undergraduate loans. Borrowers with incomes below the minimum threshold will have a $0 monthly payment.

How long is the repayment period for the new student loan repayment plan?

The repayment period for the new student loan repayment plan is typically 20 to 25 years. However, the new plan, known as SAVE (Saving on a Valuable Education), reduces time to forgiveness to as little as 10 years for borrowers who enter repayment with less than $12,000 in loans (targeting the typical community college borrower).

How does the new student loan repayment plan compare to previous IDR plans?

The SAVE Plan makes monthly payments much lower than older IDR plans. It does this in 2 ways compared to the similar REPAYE Plan: first, it raises the minimum income level where payments start from $0.

Second, once fully in action, SAVE will halve the rate that borrowers (earning more than the minimum) pay each month for undergraduate loans—from 10% to 5% of discretionary income. Over 1 million low-income borrowers can now get a $0 monthly payment, and others will save at least $1,000 per year compared to old IDR plans.

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Final thoughts

As student financing changes with new government plans like SAVE, TuitionHero is here to guide you. We make sure you know the best options for managing student debt.

Watch for upcoming decisions that could affect your loan repayment. Whether you're looking at scholarships or thinking about refinancing, we're here to help with just a click.

Source

• Biden-Harris Administration Announces Nearly 5.5 Million Borrowers Are Enrolled in the SAVE Plan | U.S. Department of Education
• Inside Joe Biden’s new 'SAVE' repayment plan for federal student loans - POLITICO
• Student Loan Debt Statistics: 2024 - NerdWallet