What you need to know about Biden’s new Student Loan Forgiveness Plan
The Biden Administration is pushing forward with another plan to try and Tackle student loan forgiveness debt a new proposal lowering monthly payments for millions of borrowers and accelerate paths to forgiveness Aaron parsigian joins us live in Tampa this morning with details good morning Aaron good morning yeah the Biden Administration is moving forward with this proposal after their initial plan to cancel up to ten thousand dollars for all borrowers it’s really hanging in legal limbo at this point take a look though this is essentially an overhaul of the income driven repayment plans.
Which is one of the payment options offered by the feds now this would also lower monthly payments and make it easier for borrowers to get loan forgiveness after 10 years of paying them down the program would cost an estimated 138 billion dollars over the next 10 years now those enrolled in the repay plan would have monthly payments cut in half capping them at five percent of their income those who earn around thirty thousand dollars a year or lower would not have to make payments the plan would also prevent unpaid interest from being added to loan balances which could prevent that snowballing of debt.
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So many students have dealt with on average graduates would save roughly two thousand dollars a year now the Biden Administration says they hope to move forward and implement this at some point in 2023 but critics have already pointed out concerns with things like the cost right now all Federal Loan payment have been paused until June of this year while this legal process of their initial plan starts to play out for now.
There any is there any consensus on this issue I don’t know uh a matter of equity i guess you’ve got to look at the people who paid their debt back and suddenly they’re seeing people whose debts forgiven and they’re asking themselves well who’s going to pay that back i guess i’ll have to pay that back too because it’s still an obligation of the taxpayer you’ve got 1.6 trillion dollars of student loan forgiveness it’s not 32 billion 1.6 trillion dollars of student loan forgiveness as you mentioned 40 million people involved in that and i don’t know of a better investment that you can make as a person especially a young person than to go to college your return on investment is usually extremely significant especially if you learned a skill that is very saleable.
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Seems to me that uh to suddenly start forgiving debt across the board this proposal for a ten thousand dollar debt reduction for every everybody who is under a certain income level 150 000 of income uh which would be most of the people who get the debt by the way is pretty outrageous i mean it’s a tremendous cost to the American taxpayer to pay for people who’ve really gotten a pretty good deal by going to college uh and got much better earning capacity and i’ll see one other thing here Andrew that’s important to remember college tuition has escalated faster than any other item in our economy besides hospital care 160 increase and that’s a function of these massive student loan forgiveness programs and that allows colleges not to be accountable they simply take the money and then they spend it and they don’t have any accountability.
You got to put some accountability on the college side to keep the cost down uh and i actually have no problem heidi’s idea that the people who were scammed uh they should get some some relief but for most Americans who went to college uh and got a great degree and they’re gonna make a lot of money it’s hard to say that the person on main street should participate in paying for their costs Heineken is is there a way to do it in a fair way i mean he’s right look there’s a lot of people who’ve already paid out they’ve they’ve paid and is there a way to either means tested or focused just on those who’ve had an unfair experience and then of course there’s going to be a debate about what an unfair experience is well first off think about this think about our veterans who couldn’t afford college who were promised that they would get college tuition paid and now they hear they didn’t really need to go serve or people who are student uh who are teachers who you know did this because their student debt would be forgiven so there’s a lot of equity issues parents who sacrifice vacations to save for college education now feel like a total wipeout of student debt is not an uh a fair thing to have happen.
The Biden white house has released a new student loan forgiveness plan that would lower monthly payments for millions of borrowers, and pause them completely for some. There’s been a freeze on loan repayments throughout the pandemic, but that’s coming to an end in June. The new proposal allows borrowers earning less than $30,600 annually to pause payments altogether. The ambitious plan also proposes reducing payments on undergraduate loans to 5% of discretionary income, and it would cancel student debt 10 years earlier for certain borrowers.
But the total cost is one of many crucial questions. NPR education correspondent Cory turner broke this story, and joins us now. It is good to see you. The white house is moving forward with the proposal that president Biden announced this past summer, but it was overshadowed by his sweeping plan to eliminate thousands of dollars of federal student loan debt for people who mollified. How does this income driven repayment plan work? Cory: If you think about the difference between the president’s debt relief plan and the income driven plan, the latter will arguably help more borrowers looking forward into the future. The new plan would do a few things, as you mentioned. For borrowers who earn less than $30,000 a year, they would be allowed to basically make a dollar monthly payments. For borrowers who take out relatively small loans, talking $12,000 or less, they mollify for forgiveness after 10 years instead of the current 20 years.
Also, maybe most importantly is something I have heard about for a long time, with the old repayment plans where you are making small monthly payments but interest is exploding. That is not going to happen under this new plan. There is a lot here for borrowers, especially lower income borrowers, to like. Geoff: Income is the only requirement. Who is eligible generally speaking? How much would someone’s payment decrease under the new plan? Cory: I think the largest decrease would be for undergraduate borrowers. There is a real preference for undergraduate borrowers. According to the education department it cuts their monthly loan payments and have, basically because of the new way , the lower threshold for caulatinscretiary income. The old wood the old rule would apply for grad school borrowers.
The plan would be open for the majority of new and current borrowers. There is one pretty large exception and that is family members and caregivers who have care plus loans. Geoff: As this is unfolding, happening on a parallel track is the president’s plan to forgive up to a $1000 in student debt. A group of — $20,000 in student debt. It is headed to the supreme court. Cory: We are now waiting. It is in the hands of the supreme court. Oral arguments will happen sometime next month and we assume we will get a decision by late may, early June. In the meantime, we wait. And we do know, this is important for borrowers to know, the administration and education department have released a timetable for a return to repayment. Whatever the supreme court decides, millions of student loan borrowers will still have loans left over that they will need to begin repaying. This year. Geoff: If the supreme court finds president Biden’s debt relief plan is legal, that means as I understand the president’s debt proposal.
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Since August 20 22 would increase deficits by at least $600 million over a decade. You reported there was some education department officials who were surprised. Others were angry about the new proposal because it leaves them scrambling to find hundreds of millions of dollars to cut from other programs. Cory: This is the thing to remember about implementing both the president’s debt relief plan and also everything else that the office for federal student a to has to do. It has lots of things, from revamping the forms, signing new contracts with services, public service loan improvements. There are the big costs and the smaller but still important cost of how to implement the program. What I have found, the office for federal student a is in a budget crisis and it is having to scale back many of its efforts for 2023 when it comes to rolling out programs. It just can’t afford it all. Geoff: Cory turner, thanks again. Cory: You are welcome.
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If you look at the interest rates prior to a couple years ago when angus king led the effort to reform student uh interest rates interest rates were way too high given what the fed was paying i think if you look at adjusting interest rates apply that adjustment to principal backwards people should pay their student debt i agree with the governor but we shouldn’t be preying on those same students by charging six seven percent when the fed’s borrowing at one or less than one so there’s a way to do this that is equal which is to equalize that interest rate apply it retroactively i think this is an idea that i’ve advanced for many years i think it’s a way to explain to people how to equalize student debt but do it in a fair way right hey joe you know i think that’s that may be true but go ahead you gotta remember what’s going on.
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Here with the ten thousand dollar elimination of debt for everybody 150 under 150 000 it’s it’s crass political politics it’s an attempt to buy votes it’s that simple uh there’s no there’s no reason to do that for most people they can pay it back and for those people who can’t pay it back you can do a workout schedule that helps them get through that uh but basically what you have here is a political agenda and the political agenda is driving policies but let me ask you this why are we not having a debate in this country you’re putting this aside why are we not having a debate in this country about how to tamp down the cost of education nobody talks about that and by the way judge that’s what i mean interestingly no i know but but the but the interesting component is we’re willing to have that conversa or people say we’ll have that conversation but we don’t we talk about in the context of healthcare all the time.
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Sometimes jud you and i have had debates about and you’ve pushed back on on some of the the price controls and other things that the government should do so how should we look at education health care and trying to bring these costs down you’ve got to put a andrew you’ve got to put accountability in the way you put it in it’s not by having a direct student loan program where basically there’s no there’s no concern about what happens to the money we used to have a program which was made by the banking system and that made sense because then you had override you had underwriting standards that made sense but you got to put pressure on the school systems not that every time we raise the pell grant or raise a student loan forgiveness grant tuitions go up it’s absurd and and when i was chairman of the health education labor and pension committee we tried to address that never able to get to get to it because of resistance from the educational community but there should be some sort of base where when you when you increase these programs colleges can’t use that increase to jump their tuitions. Apply Now!!