Jan 11, 2023
White House Offers New Student Loan Payment Plans as Debt Cancellation Held Up in Court Transcript
The Biden administration released a new student loan payment plan that would lower monthly payments for millions of borrowers and pause them completely for some. Read the transcript here.
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Speaker 1 (00:00):
The Biden White House has released a new student loan 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 the many crucial questions. NPR education correspondent Cory Turner broke this story and joins us now. Cory, it’s good to see you. The White House is moving forward with this proposal that President Biden first announced this past summer, but it was really overshadowed by his sweeping plan to eliminate thousands of dollars of federal student loan debt for people who qualify. How does this income driven repayment plan work?
Cory Turner (01:00):
Yeah, it’s really interesting, Jeff, because if you think about the difference between the President’s broad debt relief plan and the income driven repayment plan they just unveiled, it’s the latter that will arguably help more borrowers looking forward into the future. This new plan would do a few things, as you mentioned before, it would, for borrowers who earn less than $30,000 a year, they’d be allowed to basically make $0 monthly payments on their loans. Also, for borrowers who take out relatively small loans, we’re talking about $12,000 or less, they qualify for forgiveness after 10 years instead of the current 20 years. Also, maybe most importantly, Jeff, is something that I’ve heard about for a long time with old income driven repayment plans where you’re making small monthly payments, but interest is exploding. That’s not going to happen under this new plan. So there’s a lot here for borrowers, especially lower income borrowers to like.
Speaker 1 (02:00):
And income is the only requirement. I mean, who’s eligible? And generally speaking, how much would someone’s payment decrease under this new plan?
Cory Turner (02:08):
Well, I think the decrease, the largest decrease would be for undergraduate borrowers. There’s a real preference in here for undergraduate borrowers. It would basically, according to the Ed department, cut their monthly loan payments in half. And that’s basically because of a new way, a lower threshold for calculating discretionary income. The old rule would apply for graduate school borrowers. The plan would be open to, I believe, the vast majority of new and even current borrowers. There’s one pretty large exception, and that is family members, caregivers, who have what are called parent plus loans.
Speaker 1 (02:47):
So as all of this is unfolding, happening sort of on a parallel track is the President’s plan to forgive up to $20,000 in student debt. A group of Republican governors challenged that forgiveness plan. It’s headed to the Supreme Court. Give us a status update on that.
Cory Turner (03:04):
We’re now basically waiting. It’s in the hands of the Supreme Court. We know oral arguments will happen sometime next month, and we assume we’ll get a decision by late May, early June, and in the meantime, we wait. And we do know, though, this is important for borrowers to know, the administration and the education department have released a timetable for a return to repayment, because whatever the Supreme Court decides here, millions of federal student loan borrowers will still have loans left over that they will need to begin repaying this year.
Speaker 1 (03:43):
So Cory, if the Supreme Court finds that President Biden’s debt relief plan is legal, it means, as I understand it, that the President’s student debt proposal since August of 2022 would increase deficits by at least $600 billion over a decade. And you reported this morning that there were some education department officials who were surprised, others were angry about this new proposal, because it leaves them scrambling to find hundreds of millions of dollars to cut from other programs.
Cory Turner (04:12):
Yeah. This is the thing to remember, Jeff, about implementing both the President’s debt relief plan, but also everything else that the Office for Federal Student Aid has to do. It’s got lots of things, from revamping the federal Student Aid form that families have to fill out. It’s got to sign new contracts with servicers, public service loan forgiveness program improvements, and so they’re the big costs, and then they’re the much smaller, but still really important costs of how do you implement this program? And what I found is the Office for Federal Student Aid is suddenly in a budget crisis, and it’s having to scale back many of its efforts for 2023 when it comes to rolling out these programs, sustaining them, because it just can’t afford it all.
Speaker 1 (04:57):
NPR education correspondent Cory Turner, thanks again.
Cory Turner (05:01):
You’re welcome, Jeff.