The Biden administration's new proposal could really help some federal student loan borrowers. If the plan is approved, some people could see their bills cut in half.
Student debt is currently a $1.7 trillion problem, according to the Federal Reserve. While monthly payments are still paused until August, or if a debt forgiveness plan is approved, this proposal could help people who are stressed over their student loans.
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The Revised Pay As You Earn Plan:
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Currently there are four income-based repayment plans. The changes are being proposed to the Revised Pay As You Earn Plan. Here are the big changes:
- Instead of being charged 10% of your discretionary income per month, you would be charged just 5%
- After 20 years of payments on undergraduate student loans, your remaining debt could be canceled
- If you took out less than $12,000 in student loans, they could be forgiven in just 10 years
Borrowers who have either undergraduate or graduate student loans would likely be eligible, however Parent PLUS loans would not be.
Defaulted loans are not usually eligible for income-based repayment plans, but the new proposal may allow those to be included.
The proposed rule is still in its early stages. It remains in a 30-day public comment period and then there is a delay before new rules are allowed to go into effect. While some parts could be implemented by the end of the year, higher education experts told CNBC they think it will be official sometime in the summer of 2024.