The Biden administration introduced a new student loan payment proposal this month, where certain borrowers could potentially see their monthly payments decrease significantly.
The repayment plan known as Revised Pay As You Earn or REPAYE, which limits borrowers monthly payments at a percentage of their income after taxes, would go under a revision within this new proposal.
“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,” said U.S. Secretary of Education Miguel Cardona in a statement on Jan. 10th.
According to a news release from the U.S. Department of Education, the revised REPAYE plan would offer $0 monthly payments for individual borrowers who make less than $30,600 annually and borrowers in families of four who make less than about $62,400.
The plan would also decrease monthly payments in half on undergraduate loans for borrowers who don’t have a $0 payment.
Currently, the REPAYE plan needs borrowers to pay 10% of their income after taxes monthly toward their student loans. The revised plan could cut that percentage to 5%, allowing for lower payments in exchange for an increased repayment timeline.
The proposal is estimated to be available July 1, 2024, according to the U.S. Department of Education.
“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,” Cardona said.