US President Joe Biden announces student loan relief with Education Secretary Miguel Cardona on August 24, 2022 in the Roosevelt Room of the White House in Washington, DC.
Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased.According to the Biden administration, inaccurate payment counts have resulted in borrowers losing "hard-earned progress" toward loan forgiveness.
As part of his debt relief plan announced last year, Biden said his Education Department would create a new income-driven repayment plan that lowers payments even further. It became known as the SAVE Plan, and it’s generally intended to replace existing income-driven plans. It didn't start getting attention until the Supreme Court struck down Biden's student loan cancelation plan.
Right away, more people will be eligible for $0 payments. The new plan won’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person. The cutoff for current plans, by contrast, is 150% of the poverty line, or $22,000 a year for a single person.As long as borrowers make their monthly payments, their overall balance won’t increase.
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