January 10, 2023
Even if the President’s student loan forgiveness program is struck down by the Supreme Court after they hear the case in February, the Biden Administration is working on another plan that you should probably know about.
The Education Department released a proposed regulation today that –if approved—would cut undergraduate monthly payments for federal student loans in half and for some allow $0 monthly payments.
The plan involves the “Revised Pay As You Earn” income driven repayment program which millions of borrowers already use. Now, there’s a lot of changes the Department of Education is proposing — so I’m going to highlight three main things that I think will impact most federal student loan borrowers.
One — if approved the Department of Education would alter the terms of the Revised Pay As You Earn plan to allow any individual borrower to pay $0 a month if you makes less than about $30,600 a year or any borrower in a family of four who makes less than about $62,400 a year.
Two — the proposed regulations would also cut monthly payments in half for undergraduate loan borrowers who do not otherwise qualify for that $0 payment plan.
And three – the proposed regulation would ensure that borrowers stop seeing their balances grow due to accumulation of unpaid interest after making monthly payments.
As I said – this is a proposed rule. So, it’s not happening yet. There’s a whole process that has to happen. First it will be published in the Federal Register tomorrow. The public will have the opportunity to comment on it and suggest changes for 30-days. And then if there are no major changes, the Department of Education hopes this rule will be finalized later this year so they can also implement it this year.
Read the announcement from the Department of Education here.
Read the fact sheet about the program here.
