Biden's Plan for Student Loan Relief and Forgiveness

Biden's new income-driven repayment plan could provide much-needed relief for millions of student loan borrowers, in addition to offering loan forgiveness. Here's what you need to know about the plan.

US President Joe Biden delivers remarks in Boston, Massachussetts, on September 12, 2022. (Photo by ... [+] Mandel NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)AFP via Getty Images
It's been a little over a year since President Joe Biden took office, and already he's made great strides in achieving his goals for the country. In a speech delivered in Boston today, the president outlined his vision for the future, including plans for continued economic growth, improved infrastructure, and greater access to healthcare. He also touched on the importance of working together as a nation to solve the challenges we face.

This is good news for those struggling to repay their student loans. It will provide much-needed relief for many people. However, it is important to remember that this is just a partial forgiveness plan. Many people will still have to make some payments on their loans.

This is great news for student loan borrowers! The new income-driven repayment plan announced by Vice President Biden will provide significant relief for millions of people struggling to repay their loans. This is a huge step forward in making college more affordable and accessible for everyone.

Student Loan Repayment Plans Based on Income: How They Work

There are many different income-driven repayment plans available for federal student loans, each with its own unique features. Under all of these plans, the borrower's monthly payments are calculated based on their "discretionary income" - which is the amount of the borrower's Adjusted Gross Income (AGI) that exceeds the poverty exclusion limit for the particular plan. This allows borrowers to make more affordable monthly payments based on their income, making it easier to repay their loans.

Assuming that the borrower remains in good standing with their payments, after 20-25 years the remaining balance on their loan will be forgiven. However, it's possible that the IRS could treat this forgiven amount as taxable income to the borrower, depending on when the forgiveness occurs. Either way, this is a potential benefit for borrowers who are struggling to repay their loans.

There are four different income-driven repayment plans available to borrowers: Income Contingent Repayment (ICR), Income Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). While each plan has its own distinct features, they all operate in a similar way. Income-driven repayment plans are designed to make repaying student loans more affordable for borrowers by basing monthly payments on their income and family size.

Biden Unveils New Plan to Forgive Student Loans

The Biden administration's new IDR plan could bring some much-needed relief to student loan borrowers. If enacted, the plan would offer several benefits, including lower monthly payments and the ability to have your remaining debt forgiven after 20 or 25 years. This could provide a real lifeline to struggling borrowers and help them get back on their feet.

  • This is good news for struggling borrowers who will now have more help in managing their student loan debt. The new IDR plan will make it easier for borrowers to get out of debt, and will also help reduce the amount of money borrowers with higher incomes have to pay each month. This is a positive change that will help many people manage their debt and improve their financial situation.
  • The Biden administration is proposing a new income-driven repayment (IDR) plan that would lower monthly payments for borrowers with student loans. Under the new plan, undergraduate borrowers would pay 5% of their discretionary income, while graduate borrowers would pay a weighted average rate. This is a significant reduction from the current IDR plans, which base monthly payments on a percentage of the borrower's discretionary income. This change would make it easier for borrowers to repay their loans and would help to reduce the overall student loan debt burden.
  • Biden's new IDR plan would forgive any remaining balance after 10 years of payments for original loan balances of $12,000 or less, as compared to 20 years or 25 years under existing plans. This would provide much-needed relief to borrowers with smaller loan balances, who often have a harder time repaying their loans in full.
  • This is great news for borrowers who are struggling to make their monthly payments. Under the new IDR plan, their loan balances will not increase, even if they are only making minimum payments. This will help many borrowers get out of debt more quickly and avoid having their balance grow to an unaffordable level.

Biden's new IDR plan is coming soon!

The Education Department's proposed new IDR plan looks promising for many borrowers, but there are still many unanswered questions. It is not clear how the repayment formula would work for borrowers with graduate school loans, or whether Parent PLUS borrowers would be able to qualify. The department has not yet released formal regulations governing the program, so borrowers will have to wait and see how it unfolds.

When To Apply For Biden’s New IDR Plan

It's been over a year since President Biden was elected on a promise to provide debt relief for American borrowers, and we're still waiting for concrete details on his plan. The Education Department must first released formal proposed regulations for the new program, and the proposal must then clear several procedural hurdles. Full implementation of the new IDR plan is not expected to occur until the summer of 2023 at the earliest — well beyond the December 31 end-date of the ongoing student loan pause. That is probably the earliest that borrowers would be able to apply. In the meantime, borrowers are stuck in limbo, not knowing whether or when they might get relief. It's time for the administration to provide some answers.

The Education Department has indicated that further details on the new IDR plan should be released in the coming weeks. It is important that the Department provides clear and concise information on the new IDR plan so that students and families can make informed decisions about their educational future.

Further Student Loan Reading: How to Repay, Forgiveness Options, and More

It's no secret that student loan debt is a huge burden for many Americans. And while there are options for loan forgiveness and repayment, it's important to know the critical dates associated with these programs.

There are a number of things that borrowers can do now in order to prepare for student loan forgiveness. First, it is important to stay current on all loan payments. Second, borrowers should keep track of their loan balance and stay aware of any changes.

Biden's proposal for student loan forgiveness could have some unintended consequences for borrowers in certain states.

The federal government offers student loan forgiveness for certain borrowers who work in certain public service jobs. If you attended one of the schools on this list, you may qualify for this program. Here's what you need to do to find out if you qualify.