WASHINGTON (Reuters) – The Biden administration said on Tuesday it was reviewing student loan repayment plans, seeking to make payments more affordable by reducing the amount owed each month and curbing unpaid interest.
The changes would save $1,000 a year for the average borrower and $2,000 a year on loans taken out by a typical graduate of a four-year U.S. public college or university, the White House and Department of Education said, adding that tens of millions of Americans are coming eligible to participate in the plan.
President Joe Biden is taking sweeping steps to alleviate student debt through a variety of approaches, even as US courts have blocked parts of his plan.
The U.S. Supreme Court in June blocked a rule that would have forgiven $430 billion in student debt for 43 million borrowers, while a federal appeals court earlier this month struck down a rule that would have made things easier for students who had been defrauded by foreign investors. benefit colleges to get their loans forgiven.
Student loan payments were suspended during the COVID-19 pandemic as shutdowns and other fallout from the spreading virus rocked the US economy, but have since resumed. Biden, who is seeking a second four-year term in the November 2024 election, has made strengthening the national economy a cornerstone of his domestic agenda.
Under the Savings on A Valuable Education (SAVE) income-driven repayment plan announced Tuesday, the amount qualified borrowers must pay each month for their student loans will be reduced from 10 percent to 5 percent of disposable income. About 1 million additional low-income borrowers will be eligible for no monthly payments at all.
The credit balance will also not grow due to unpaid interest as long as borrowers make the required monthly payments, it added. Loans could be forgiven in just 10 years for eligible borrowers, compared to 20 or 25 years with previous income-driven plans.
“We continue to pursue an alternative path to provide student debt relief to as many Americans as quickly as possible,” the White House said in a statement.
The plan “will be critical to low- and middle-income borrowers, students at community colleges, and borrowers who work in the public sector,” the Department of Education said in a separate statement. On average, the plan will halve total lifetime payments for black, Hispanic, Native American and Alaska Native borrowers, the White House added.
Data released this month shows student loan balances fell by $35 billion in the second quarter to $1.57 trillion.
(Reporting by Susan Heavey; editing by Jonathan Oatis and Heather Timmons)