In April 2022, the US Department of Education announced a new initiative for public service student loan forgiveness and income-driven repayment (IDR). Payment plans that are income-based enable student loan borrowers to repay at a lower rate, based on family size and income. After 20-25 years of payments, the remaining debt can be cancelled.
In March 2023, the Department of Education notified borrowers whose loans could be canceled, and around 3.6 million borrowers will be given at least three years of credit toward forgiveness, according to the Federal Student Aid.
According to loan advisors, President Biden’s loan-cancellation program is separate from this program, and will not be affected if this program is not passed by the US Supreme Court. The Biden administration also announced an updated plan for income-based loan forgiveness, called REPAYE. REPAYE is more generous than existing loan repayment plans in that it will lower payments on undergraduate loans from 10-15% of discretionary income to 5%. It will also affect interest in that if the borrower’s payment does not cover interest for a particular month, the remaining interest will not be charged or added to the balance.
According to the White House, President Biden’s plan will eliminate debt fully for approximately 18 million people, and 90% of the country’s 45 million student loan borrowers will receive some form of debt-relief. The plan was brought to the Supreme Court on February 28, 2023, and is expected to issue a decision by June 2023.