Inside Biden’s new student loan repayment plan

Jul 05, 2023

INSIDE BIDEN’S NEW ‘SAVE’ REPAYMENT PLAN FOR STUDENT LOANS: Alongside his pledge to start over on a plan to cancel student debt, President Joe Biden last week unveiled the final details of his separate, student loan repayment program. The program, which has been in the works for more than a year, will permanently reshape how borrowers repay their federal student loans.

President Joe Biden (right) speaks in the Roosevelt Room of the White House as Education Secretary Miguel Cardona listens.

President Joe Biden (right) speaks in the Roosevelt Room of the White House as Education Secretary Miguel Cardona listens. | Evan Vucci/AP Photo

Here’s our quick guide to Biden’s new “SAVE” plan for student loan repayment:

— What’s in the plan: The finalized income-driven repayment program is largely unchanged from the initial proposal the administration unveiled in January. Many borrowers would face lower monthly payments, the department will curb interest accrual, and borrowers with relatively smaller balances could see loan forgiveness more quickly.

— What’s not in the plan: The administration rejected calls to lower the monthly payment amount (5 percent of income) for graduate borrowers, keeping the benefit only for undergraduate borrowers. And the administration didn’t budge on Parent PLUS borrowers, who remain excluded from the new program.

— Phased implementation: A key feature of the plan that Biden touted on Friday — cutting payments for undergraduate borrowers in half — won’t be available to borrowers for another year, in July 2024. That’s because the administration is implementing the new program in phases. Here’s how the Education Department says it’ll work:

— Sign-ups start soon: The department says that “later this summer” borrowers will be able to begin enrolling in the SAVE plan. It plans to automatically switch borrowers currently enrolled in the existing REPAYE plan to SAVE at that time. The department says that borrowers who apply for one of those plans “this summer” will have their applications “processed in time” for their first payment due dates that begin in October.

— Happening this summer: Two of the biggest benefits of the SAVE program will go into effect “this summer,” according to the Education Department. First is the increase of the income threshold for zero-dollar payments from 150 percent of the poverty line to 225 percent of the poverty line, immediately lowering payments for lower-income borrowers. Second, the department’s new interest limits kick in. Borrowers won’t have to pay interest that accrues in a month beyond what’s covered by their monthly payment.

— Waiting until next year: The Education Department says that undergraduate borrowers won’t see their payments cut in half (from 10 percent to 5 percent of their discretionary income) under the program until July 2024. And while borrowers will be able to sign up this summer to allow the Education Department to automatically use their tax information to stay enrolled in the program each year, that option won’t be fully up and running until 2024, according to the department.

— The price tag: The Biden administration estimates that its new, more generous income-driven repayment plan will cost $156 billion over the next decade, though that figure assumed the Supreme Court would allow student debt cancellation. The estimate is slightly higher than the administration’s initial analysis but still significantly lower than many outside analyses, including a projection by the Congressional Budget Office.

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BIDEN ADDRESSES NEA: President Joe Biden and first lady Jill Biden on Tuesday virtually addressed the National Education Association’s annual meeting being held in Orlando.

— In his remarks, Biden called the teacher shortage a “national security issue.” He vowed to fight for higher pay for teachers. “Since I took office, we’ve added 100,000 public school teachers, and we’re going to continue working to address the teacher shortage,” he said.

— Biden touted the $42 billion of student debt his administration has forgiven for more than 615,000 borrowers, including teachers, under the Public Service Loan Forgiveness program. “The program was too complicated, too difficult to take advantage of,” Biden said. “But Jill and I were determined to fix it, and we have.”

— On gun control: “Educators now find themselves on the front lines of gun violence,” Biden said, adding that “Congress needs to step up, pass commonsense gun safety laws to protect our kids and educators.”

“Arming teachers is not the answer,” Biden said. “Banning assault weapons and high-capacity magazines, extensive background checks — they’re part of the answer. They’ll make a big difference.”

— On book bans: Biden said he would “stand with teachers and educators against politicians who are trying to score political points by banning books.”

— NEA election results: Delegates at the NEA’s Representative Assembly reelected President Becky Pringle to lead the 3-million-member union. Princess Moss was reelected as the union’s vice president and Noel Candelaria was reelected as secretary-treasurer. Delegates also reelected Mark Jewell and elected Shannon McCann as members of the NEA’s executive committee.

Higher Education

ICYMI — NEW HIGHER ED RULES TAKE EFFECT: Major pieces of the Biden administration’s higher education agenda took effect on July 1 over the holiday weekend. Here’s a roundup of some key policies:

— Pell for incarcerated students: The Biden administration’s rules implementing Congress’ 2020 repeal of the ban on incarcerated students receiving Pell Grants are now in effect. The Education Department said it began accepting applications on Monday from colleges that want to offer prison education programs funded by Pell Grants.

— Since 2016, the Education Department has allowed a limited number of incarcerated students to receive Pell Grants as part of its Second Chance Pell pilot program. A new analysis by the Vera Institute finds that incarcerated students have earned nearly 12,000 credentials through the department’s Second Chance Pell pilot program. Now, with the full reinstatement of Pell Grants, the agency estimates approximately 760,000 more students will be eligible.

— Borrower defense to repayment: The Biden administration’s new “borrower defense” standards make it easier for borrowers to apply to have their student loans forgiven on the ground that they were defrauded. The rules also prohibit colleges from using mandatory arbitration agreements in some cases.

— Also included in “borrower defense” package of rules: The Biden administration’s effort to ease requirements in the Public Service Loan Forgiveness program, streamline loan discharges for severely disabled borrowers, and eliminate interest capitalization in most circumstances.

— An exception in Texas: For-profit colleges in Texas won an emergency order from a federal appeals court on Friday that blocks the “borrower defense” rules from taking effect for colleges that belong to Career Colleges & Schools of Texas. A three-judge panel of the 5th Circuit rejected the group’s request for a broader injunction halting the rules nationwide.

— Change in ownership: The administration’s new process for approving transactions in which colleges are sold or purchased or otherwise change ownership is also now in effect. The rules are aimed at tightening the requirements, especially for for-profit colleges that seek to convert to nonprofit status.

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Syllabus

— Activists spurred by affirmative action ruling challenge legacy admissions at Harvard: The Associated Press.

— Retailers, beware: Resumption of student loan payments could lead some buyers to pull back: The Associated Press.

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