New Student Loan Proposal Could Cut Monthly Payments In Half

[turbinetree]

The new repayment plan would become a permanent fixture of the student loan infrastructure and apply to current and future borrowers.

By Susie Madrak — 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.

https://crooksandliars.com/2023/01/new-student-loan-proposal-could-cut

If you have a FFLEP you need to get more clarification from the DOE, because over 800,000 where not eligible if you have the FFLEP....that is why there are lawsuits pending from states on student loans that are backed by the government and being administered by private lenders, in other words they were sold to the lenders, also for reference these are loans which were taken out back in 2008, they were not Pell grants

[underpants]

1. They need to get rid of the daily compounding of interest

THAT’s the killer.

[Eyeball_Kid]

2. I started borrowing school loan money for my daughter's education

in 2006. At the present rate of payment, I'll likely die before the loan is paid, at sometime in my 90s. AND... I worked for decades in public service, but because of a calendar quirk, can't be eligible for loan forgiveness.

[jimfields33]

3. Yes just make them interest free. Government gets back the money.

I’m not sure why government needs to make money on these. As far as cutting the monthly, it sounds good but it will just prolong the payback schedule. Now people literally will be in their 50-60’s finishing them.

[underpants]

4. I read earlier there's a cap on payment years for smaller loans

People have complained that the monthly loan payments are unmanageable and that the calculations fail to fully account for their living expenses. To remedy those concerns, the Biden administration would increase the amount of income protected from repayment to 225 percent of the federal poverty guidelines. That means a single borrower earning less than $30,500 a year and a borrower in a family of four making less than $62,400 would not be required to make monthly payments on their loans, according to the department.
The plan also would cap payments for undergraduate loans to 5 percent of a person’s discretionary income instead of 10 percent. Borrowers with debt from undergraduate and graduate studies would pay between 5 and 10 percent according to a weighted average calculated from the share of what they originally borrowed for undergraduate studies.

The plan would also shorten the path to forgiveness for people with small balances. Those who borrowed $12,000 or less for undergrad or graduate school would receive loan forgiveness after making 10 years worth of payments, instead of 20 or 25 years. Every additional $1,000 borrowed above that amount would add one year of monthly payments to the time a borrower must pay before their debt is forgiven.
https://www.washingtonpost.com/education/2023/01/10/biden-student-loan-repayment-plan-details/

[Eyeball_Kid]

6. It ends up being an extra tax...

that calculates to be about 40% of the loan principle by the time that the principle is paid off.

And as I mentioned upthread, I borrowed the money for my daughter's education beginning in my late 40s. If I were to start paying this month, it would suck away at my retirement income (beginning 7 years ago) and I won't finish paying until I'm in my late 80s-early 90s. It's an incredible burden. And my daughter borrowed the other half of the money for her education, so we're in hock big time.

[Johnny2X2X]

5. I've been posting about these changes here for almost 2 years now

The ins and outs are fantastic and in my opinion this largely solves the student debt crisis in this country permanently. I'll state that again in all CAPS because it's that striking:

THIS RULE CHANGE LARGELY SOLVES THE STUDENT DEBT CRISIS IN THIS COUNTRY PERMANENTLY!!!

Basically if you want to go to college, you're pledging 5% of your adjusted Gross Income minus cost of living for 20 years, period.

Make $90,750K a year for a family of 4, the poverty rate income is $27K a year for a family of 4. 2.25 times that is $60,750. Subtract that from your gross income and you are paying 5% of $30K a year. That's $125 a month, for 20 years, and then if there is a balance remaining it is forgiven.

Make $65K a year a s single person, the poverty rate income for a family of 1 is $13,590 a year. 2.25 times that is $30,577.50, subtract that from $65K and you're paying 5% of $34,422. That's $143.42 a month for 20 years and then if there is a balance remaining it is forgiven.

Things are a little more complicated for grad students, but it still offers huge saving for people with Masters degrees.

Again, this largely if not completely solves the student debt crisis in America. Now the cost of college is another matter entirely, and we can get to work on that. But this rule means affordable payments for nearly all borrowers. There is an income cap though that is quite high.

[maxsolomon]

7. NOT GOOD ENOUGH! All Student debt should be cancelled by Executive Fiat!

I'll vote Republican if Biden doesn't do what I want! That'll solve the problem!

Regards,
Millennials