Biden Administration, Education

Biden Administration Introduces New Regulations to Reduce Cost of Federal Student Loan Payments

The Biden Administration’s proposed regulations for a Revised Pay As You Earn (REPAYE) plan would create the most affordable income-driven repayment (IDR) plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers’ progress toward forgiveness and provide student debt relief to some 40 million borrowers © Karen Rubin/news-photos-features.com

Despite ongoing opposition by Republicans, President Joe Biden continues to introduce programs to relieve the burden of student loans. This is a fact sheet from the Department of Education describing a Revised Pay As You Earn (REPAYE) plan to provide student debt relief for 40 million borrowers:

Today, the U.S. Department of Education (Department) proposed regulations to reduce the cost of federal student loan payments, especially for low and middle-income borrowers. The regulations fulfill the commitment President Biden laid out in August when he announced his Administration’s plan to provide student debt relief for approximately 40 million borrowers and make the student loan system more manageable for student borrowers. The proposed regulations would create the most affordable income-driven repayment (IDR) plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers’ progress toward forgiveness.  

“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” said U.S. Secretary of Education Miguel Cardona. “We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed. These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.” 

The proposed regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400. The regulations would also cut in half monthly payments on undergraduate loans for borrowers who do not otherwise have a $0 payment in this plan. The proposed regulations would also ensure that borrowers stop seeing their balances grow due to the accumulation of unpaid interest after making their monthly payments.  

While these regulations would provide critical relief to student borrowers, the Biden-Harris Administration is also committed to ensuring postsecondary institutions and programs are held accountable if they leave borrowers with unaffordable debts. The Department is currently working on a proposed gainful employment regulation that would cut off federal financial aid to career training programs that fail to provide sufficient financial value and require warnings for borrowers who attend any program that leaves graduates with excessive debts. The same regulatory package will also include proposals to strengthen the conditions that can be placed on institutions that fail to meet the requirements of the Higher Education Act or exhibit signs of risk.  

The Department is also taking steps today to carry out President Biden’s announcement from August that the Department would publish a list of the programs at all types of colleges and universities that provide the least financial value to students. To advance this effort, the Department is publishing a request for information to seek formal public feedback on the best way to identify the programs that provide the least financial value for students. This public comment process will ensure the Department is carefully considering a range of perspectives and considerations as it constructs the list. Once the list is published, institutions with programs on this list will be asked to submit improvement plans to the Department to improve their financial value.  

Estimated effects of the proposed IDR Plan 

The proposed regulatory changes would substantially reduce monthly debt burdens and lifetime payments, especially for low and middle-income borrowers, community college students, and borrowers who work in public service. Overall, the Department estimates that the plan would have the following effects compared to the existing REPAYE plan: 

  • Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40%. Borrowers with the lowest projected lifetime earnings would see payments that are 83% less, while those in the top would only see a 5% reduction. 
  • A typical graduate of a four-year public university would save nearly $2,000 a year relative to the current REPAYE plan. 
  • A first-year teacher with a bachelor’s degree would save more than $17,000 in total payments while pursuing Public Service Loan Forgiveness—a two-thirds reduction in what they would pay in total under REPAYE.  
  • 85% of community college borrowers would be debt-free within 10 years
  • On average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half. 

Building on an Unparalleled Record of Debt Relief 

The draft regulations build upon the work the Biden-Harris Administration has already done to improve the student loan program, make colleges more affordable, approve $48 billion in targeted relief to nearly 2 million student loan borrowers, and fight to provide up to $20,000 in one-time debt relief to over 40 million eligible borrowers, including 26 million who have already applied. These regulations also propose to build on the Administration’s commitment to ensuring IDR plans deliver relief to eligible borrowers. This includes ongoing steps to provide accurate counts of progress toward forgiveness for borrowers through a one-time account adjustment. 

The proposed regulations and request for information will be published in the Federal Register tomorrow. The public may comment on both documents through the Regulations.gov website for 30 days. The Department expects to finalize the rules later this year and aims to start implementing some provisions later this year, subject to any changes made based on public comments. 

View an unofficial copy of proposed IDR regulation here and a fact sheet with further information here. View an unofficial copy of the RFI here, and a fact sheet with further information here.

Fighting for Debt Relief at the Supreme Court

Since President Biden first announced his intention to cancel up to $20,000 in student loan debt for the vast majority of borrowers, opponents of student debt relief have filed legal challenges seeking to halt this effort. In December, the Supreme Court agreed to hear two of these challenges– Nebraska v. Biden (recaptioned Biden v. Nebraska at the Supreme Court), brought by Republican officials in Nebraska, Missouri, Kansas, South Carolina, Arkansas, and Iowa, and Brown v. Biden (recaptioned Biden v. Brown at the Supreme Court), a challenge brought by student loan borrowers in Texas and funded by a right-wing dark-money group. 

Today, an historic coalition of cities, states, experts, and advocates filed more than a dozen amicus curiae briefs with the U.S. Supreme Court in support of the Biden Administration’s student debt relief program. 

This week’s briefs support the Justice Department’s effort to defend this policy before the nation’s highest court. To date, more than 26 million Americans have applied for student debt relief and more than 40 million Americans are expected to benefit when this program is fully implemented.

Leaders and public officials join law scholars, economists, sociologists, higher education and public policy experts from across the political and ideological spectrum in briefing the high court. The briefs represent the breadth of communities that stand to benefit from student debt relief, including working people, borrowers of color, veterans, older people, people of faith, along with cities and states across the country. Together, these briefs showcase the broad support, strong legal foundation, and urgent economic necessity underpinning President Biden’s effort to cancel student debt for 40 million Americans.

Amici Curiae Quote Sheet is available here: https://protectborrowers.org/wp-content/uploads/2023/01/Student-Debt-Relief-Amici-Curiae-Quote-Sheet.pdf

Amici Curiae Summaries and Highlights are available here: https://protectborrowers.org/wp-content/uploads/2023/01/Student-Debt-Relief-Amici-Curiae-Summaries-and-Highlights.pdf

The amicus curiae briefs filed in support of the U.S. Department of Justice in Biden v. Nebraska and Biden v. Brown include: