Biden delays release of income-focused student loan repayment plan

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  • The Department of Education is delaying the release of a new income-based repayment plan for student loans.
  • A spokesperson told Insider the proposal will be in a separate package and unveiled at a later date.
  • Proponents fear this will push back needed reforms to plans for low-income borrowers.

President Joe Biden’s Education Department is finalizing rules that will bring relief to millions of student loan borrowers, but a published proposal to lower monthly bills is being pushed back.

Income-contingent repayment (IDR) plans have been created to offer borrowers affordable monthly payments based on the income they take home, with the promise of loan forgiveness after 20 or 25 years, depending on the plane they are on. But the plans have come under scrutiny in recent years due to complicated administrative requirements that have excluded many borrowers from qualifying for the plans. A recent NPR investigation found that some lenders failed to keep up with borrower payments, pushing them off the path of loan forgiveness and creating significant administrative burdens.

As a result, the Department for Education pledged to create a new repayment plan that would work better for borrowers as part of the rule-making process, and it was due to unveil that plan this month. However, a department spokesperson told Insider on Thursday that the release of this new plan is delayed and will not be included in the next package which will be finalized by November 1.

This will ensure that measures such as expanding access to Pell grants for incarcerated students are finalized, the spokesperson said. The IDR proposal will be introduced in a separate package which the ministry says can still be implemented in July 2023 alongside the other proposals.

Despite the ministry’s belief that this delay will not delay final implementation, advocates have expressed concern over the announcement. Persis Yu, director of policy and general counsel for the Student Borrower Protection Center, said in a statement that “struggling federal borrowers are waiting for President Biden to deliver on his promise to provide relief.”

“Failure to provide a finalized IDR rule by November 1 means borrowers will either have to wait another year for the promise of a truly affordable repayment option or risk their financial well-being as that the ministry and its departments – with their history of incompetence and abuse – rush to implement another reimbursement plan,” Yu said.

In April, the Government Accountability Office revealed that 7,700 borrowers were “potentially eligible” for loan forgiveness but were continuing to make payments due to tracking errors. As a result, in April, the ministry announced an adjustment to IDR plans that included a one-time review of all previous payments that may have been disqualified for forgiveness progression, which is expected to bring 3.6 million borrowers closer to l relief.

While it’s unclear exactly what the next IDR reform proposal will entail, the previously announced adjustments are currently being implemented and borrowers may not see the effects until the fall of this year. The ministry also noted on its website that permanent fixes include “proposals to allow more loan statuses to count toward IDR cancellation, including certain types of deferments and forbearances.”

However, with student loan repayments set to resume in just over a month, proponents want to ensure the temporary IDR adjustments are fully implemented before borrowers face monthly bills again. . Thursday, 134 organizations wrote to Education Secretary Miguel Cardona, urging him to extend the payment pause until the IDR adjustment is fully processed “to reduce confusion and ensure that borrowers whose loans will be canceled do not do not resume reimbursement unnecessarily”.

For now, details on when the new IDR plan will be unveiled, and what it will encompass, remain to be seen.

“Another thing coming out soon is a new repayment plan, and we’re looking at reducing monthly payments for low-income people,” Education Undersecretary James Kvaal said in a statement. a meeting this week. “And we believe this new plan will make student loans much more affordable, and we’ll be announcing details in the coming weeks.”

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