For many federal student loan borrowers, the lesser-known plan, which Biden first announced in August, would not only reduce their monthly payments but also lower the total amount they pay back over time
While President Joe Biden’s student loan forgiveness program promising up to $20,000 in one-time debt relief for low- and middle-income borrowers is tied up in the courts, the Department of Education is working on a new repayment plan that has the potential to significantly help both current and future borrowers. . Plus, the proposed repayment plan is less likely to face the legal challenges that have stalled Biden’s broad forgiveness program.
Interest subsidy: Under the new proposal, unpaid interest would not accrue. That means that a borrower’s balance won’t increase even if the person’s monthly payment doesn’t cover the monthly interest. Shorter time to forgiveness: Currently, borrowers who pay for 20 or 25 years under an income-driven repayment plan will see their remaining balance wiped away. Under the new proposal, those who borrowed $12,000 or less will see their debt forgiven after paying for just 10 years.
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