Plans A and B on Student Loans



New Orleans     No one can say that the Biden administration is not serious about student debt relief and more equitable access to education.  This was all made very clear with his earlier proposal to cancel up to $20,000 in federal student debt, pretty much across the board.  That proposal has been stalled in the lower courts and is now on the Supreme Court docket, so your bet is as good as mine about its chances of survival and implementation.

There’s no question about the original proposal being Plan A, but to the administration’s credit the Department of Education has issued a new rule on “income-driven repayment” plans that won’t do that job, but as Plan B, does get pretty far down the road.

It’s complicated and there are thirty days to comment, so this may not be the final-final version, but here are some of the elements that I’ve parsed from the Times and the Journal:

  • Payments for undergrads will be lowered to 5% of discretionary income from 10%. Grad students will be at 10% of discretionary income.
  • There is more protection of certain income and expenses from discretionary income which will allow some lower income students to make zero payments.
  • Interest payments will not be automatically tacked on, unlike now. As long as payments are being made, interest will not continue to accrue.
  • Borrowers with incomes less than 225% of the federal poverty line or $30,600 for a single borrower or $62400 for a family of four wouldn’t have to make monthly payments on their loans.
  • After 10 years of payments, even zero payments, loans would be forgiven where the forgiveness timeline now is 20 years.
  • This proposal would collapse all other income-based education plans, bringing some order to the current chaos and complexity.

Remember that all of these plans only impact student loans and debt to the federal program, and many may also have bank and institutional loans as well, so none of this is a panacea or a get-out-of-debt-free card.  But, is this a better deal than the existing program called REPAYE?  Yes, by a country mile! “A government watchdog report last year found that only 157 borrowers out of eight million enrolled in the program successfully had their debt forgiven after decades of payments.  The program has existed since 1992.”  Face the facts, it’s broken and broken so badly that it has to be fixed no matter what anyone tries to say.

Another plus, for students with lower debt in the under $12000 range, attending some state and community college degree programs, this program would pretty much make it a free ride.  Given the quick death of the Biden free-community college plan, this Plan B is a good backdoor to just about making that a reality.

All the studies have proven that education doesn’t get people out of poverty, but on the other hand, it doesn’t hurt.  Plan A and Plan B are all steps in the right direction!