The U.S. Department of Education on Tuesday unveiled proposed new regulations that officials said would make it easier to afford student loans payments.
The changes would revamp how federal income-driven repayment plans work by, in part, raising income thresholds so more borrowers are eligible for $0 monthly payments.
“For more Americans to realize the benefits of higher education we must make paying student loans more affordable,” said U.S. Education Secretary Miguel Cardona during a call with reporters. “We’re making a new promise to today’s borrowers and to generations to come: Your student loan repayments will be affordable.”
About 8 million people are currently enrolled in one of the federal income-based repayment plans, and the pending updates could attract more participants, officials said.
Under the proposed new rules, single borrowers who earn less than about $30,600 a year and any borrower in a family of four who makes less than about $62,400 would not need to make any monthly loan payments. The thresholds would vary by family size.
Additionally, borrowers with higher incomes would save at least $1,000 a year compared to their existing income-driven repayment plans, officials estimated. Those who borrowed money to pay for undergraduate studies would see payments cut in half from 10% of their discretionary income to 5%.
The new rules would stop unpaid interest from accumulating and shorten the timeframe that those with smaller loans must be in repayment before they qualify to have any remaining balances forgiven.
Those with Parent PLUS loans would not be eligible for this specific revamped repayment plan, officials said.
The administration is aiming for changes to go into effect later this year following a required public comment period. Officials did not give an exact date for implementation.
Federal student loans payments have been paused since the start of the COVID-19 pandemic.
After several extensions, payments were set to resume this month, but President Joe Biden’s administration extended the grace period into this year as it waits to see if the courts will allow Biden’s broad student loan forgiveness plan to proceed.
That debt relief plan, which Biden introduced in August, would forgive up to $20,000 in federal student loan debt for eligible borrowers.
The proposed repayment changes announced Tuesday are in addition to the court-blocked loan forgiveness plan, which senior administration officials said they’ll continue to fight for.
Administrators said they’re also pursuing a number of measures aimed at schools and training programs.
“If we are gonna invest in affordability we also need greater accountability for colleges that leave students with unaffordable debt,” said Under Secretary of Education James Kvaal.
He said that includes identifying and listing programs that offer the least financial value. Kvaal said officials are considering regulatory steps to warn students about such programs before they enroll.
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