The White House is moving forward with a proposal that would offer a new way to repay federal loans under much more lenient terms, lowering student loan payments for millions of Americans both now and in the future. The repayment programme was unveiled in August by President Joe Biden, but it was overshadowed by his far-reaching plan to reduce or eliminate student debt for 40 million Americans.

Despite the payment plan’s low profile, some education experts believe it to be a more effective tool for lowering the cost of college, particularly for those with lower incomes. Officials from the Education Department described the new plan on Tuesday as a “student loan safety net” that will stop borrowers from accruing excessive debt.

Miguel Cardona, the secretary of education, stated that “student debt has turned into a dream killer.” This is a promise to the American people that we will, at long last, fix a broken system and lower the cost of student loans. Democratic presidential candidate Joe Biden is continuing with the repayment plan despite the Supreme Court’s uncertainty regarding the outcome of his one-time debt cancellation. The White House has requested that the court reject two conservative opponents’ legal challenges and uphold the plan.

Oral arguments are scheduled for February 28. Last week, the Biden administration submitted its brief. Tuesday saw the formal publication of the new repayment plan by the Education Department in the Federal Register, kicking off a lengthy period for public comment.

The proposal would significantly overhaul income-driven repayment plans, one of several payment options provided by the federal government, if it were to become law. The resulting plan would promise that unpaid interest won’t be added to a borrower’s loan balance and would have lower monthly payments, an easier road to forgiveness, and these features.

Currently, the federal government offers four different income-driven plans, but the proposal would primarily phase out three of them and concentrate on one more straightforward option, reducing the confusing array of options borrowers currently have to choose from. A borrower’s discretionary income cannot exceed 10% of their monthly payments under the current plans, and those making less than $20,400 annually are exempt from making payments. The new proposal would reduce borrowers’ debt in half by capping undergraduate loan payments at 5% of their income and only requiring payments from those who make more than about $30,000 annually.

Borrowers would not be charged for any accumulated interest as long as they make their regular payments. The modification is intended to stop borrowers from having unpaid interest added to their loan balance, a practise that can still result in debt accumulation even when borrowers are making payments.

Importantly, the proposal would also make it simpler to have debt forgiven after making payments for several years. After 20 or 25 years of payments, current plans guarantee that any outstanding debt will be cancelled. For those who took out loans totaling $12,000 or less, the new plan would eliminate all outstanding debt after ten years. Additional borrowing would add a year for every $1,000.

They caution that this might encourage more students to take out loans and encourage colleges to raise tuition costs if they know students won’t be responsible for repayment. Others have called income-driven payment plans a failed policy and urged the administration to do away with them entirely. Critics point to a federal report from the previous year that found thousands of borrowers were stuck with debt that should have been forgiven due to careless oversight of the programme.

Cardona stated that his organisation is working on additional proposals that would make colleges answerable if their students accrue excessive debt. Biden has called for educating the public about programmes that burden graduates with debt. On Tuesday, the Education Department started the procedure to achieve that goal by consulting the public on the best way to recognise “low-value” programmes.

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