New Biden student loan plan cuts payments for millions, White House says
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[August 23, 2023]
WASHINGTON (Reuters) -The Biden administration on Tuesday
said it was overhauling 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 typical borrower and $2,000
a year on loans taken by a typical graduate of a four-year U.S. public
college or university, the White House and the Department of Education
said, adding that tens of millions of Americans are eligible to enroll
in the plan.
President Joe Biden is pursuing sweeping student debt relief actions
through various approaches even as U.S. courts have blocked certain
pieces of his plan.
The U.S. Supreme Court in June blocked one rule that would have canceled
$430 billion in student loan debt for 43 million borrowers, while a
federal appeals court earlier this month halted a rule that would have
made it easier for students who had been defrauded by for-profit
colleges to have their loans forgiven.
Student loan payments were paused during the COVID-19 pandemic as
shutdowns and other fallout from the spreading virus upended the U.S.
economy, but have since resumed. Biden, who is seeking a second
four-year term in the November 2024 election, has made shoring up the
nation's economy a cornerstone of his domestic agenda.
Under the Saving on A Valuable Education (SAVE) income-driven repayment
plan announced on Tuesday, the amount qualified borrowers have to pay
each month on their undergraduate loans will be cut from 10 percent to 5
percent of discretionary income. About 1 million more low-income
borrowers will qualify for no monthly payments at all.
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U.S. President Joe Biden speaks during a
joint press conference with Japanese Prime Minister Fumio Kishida
and South Korean President Yoon Suk Yeol (not pictured) during the
trilateral summit at Camp David near Thurmont, Maryland, U.S.,
August 18, 2023. REUTERS/Evelyn Hockstein/File Photo
Loan balances will also not grow because of unpaid interest as long
as borrowers make the required monthly payments, it added. Loans
could be forgiven in as little as 10 years for borrowers who
qualify, down from 20 or 25 years for previous income-driven plans.
"We are continuing to pursue an alternative path to deliver student
debt relief to as many Americans as possible as quickly as
possible," the White House said in a statement.
The plan "will be critical for low- and middle-income borrowers,
community college students, and borrowers who work in public
service," the Education Department said in a separate statement. On
average, the plan will cut total lifetime payments in half for
Black, Hispanic, American Indian and Alaska Native borrowers, the
White House added.
Data released this month showed student loan balances declined by
$35 billion to $1.57 trillion in the second quarter.
(Reporting by Susan Heavey; editing by Jonathan Oatis and Heather
Timmons)
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