Many school borrowers could get $0 off under Biden’s new plan. Things you should know

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Inside the new student loan repayment plan The proposal was launched on January 10 by the Biden administration, many borrowers could see their monthly payments drop to $0.

The new option revises one of four existing income-based plans, which limit borrowers’ fees to a portion of their disposable income. with the intention of making the debt easier to pay.

Instead of paying 10% of their income per month, under the proposal, the Revised Pay As You Earn Repayment Plan, or PAYMENT BACKborrowers are required to pay 5% of their taxable income toward their student loans.

The new REPAYE plan could be officially available on July 1, 2024, according to higher education expert Mark Kantrowitz. That comparison is based on a 30-day public comment period on the proposed rule and then becomes clear before the new rules take effect. But some parts of the plan can be implemented quickly, he said.

Here’s what borrowers should know.

Many people earn $0 salary

Under the current REPAYE plan, qualified income is defined as income above 150% of the federal poverty guideline. And so, income-based singles start paying around $21,900, based on 2023 guideKantrowitz said.

Under the new plan, borrowers don’t need to make payments based on income up to 225% of the federal poverty guideline, or about $32,800, Kantrowitz said.

He gave an example of how the monthly bills can be changed with the option of recovery.

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Previously, a borrower making $40,000 a year would have a student loan payment of about $151. Under the revised plan, their pay would drop to $30.

Someone earning $90,000 a year, meanwhile, could see their monthly payments drop to $238 from $568, Kantrowitz estimated.

Those who earn less than $32,800 will receive $0 each month.

School borrowers benefit the most from the change

The new option should be available for borrowers under school and graduate school loans, although the payment will be lower for borrowers below.

Holders of Parent Plus loans will not be eligible to enroll in the rehabilitation plan.

Bad loans generally ineligible for income-based repayment plans.

But under the new proposal, those who have fallen behind may be able to sign up for the income repayment planAnother one of the plans is to repay the income.

Borrowers need to register

Once the new REPAYE plan is available, borrowers can call their student loan servicer to enroll in the option, or apply at StudentAid.gov.

“Any new plan may take some time to implement, so borrowers will have a lot of time to learn how it works,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance. , a trade group for federal student loans. .

It has a 10- or 20-year payment schedule

After 20 years of student loan payments, any remaining debt is forgiven with the current REPAYE plan. The edit option saves that timeline.

Also, under the Biden administration’s proposal, those with pre-existing student balances of $12,000 or less could have their loans forgiven after 10 years.

Student loan forgiveness can come with a tax bill

What is happening with the payment plan suspension?

The Biden administration has suspended applications for student loan forgiveness

He said the bill would be repaid in just 60 days after the trial on his student amnesty plan was completed and the debt could begin to be eliminated.

If the Biden administration is still defending its policy in court at the end of June, or if it can’t move forward with student loan forgiveness by then, the fees will be picked up. at the end of August, it is said.

The Supreme Court will begin hearing arguments on legal challenges to the plan February 28.

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