WASHINGTON, D.C. — Millions of borrowers across the country could soon see a change in how they pay off their federal student loans.
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The United States Department of education is calling their plan a “Student Loan Safety Net,” meant to make payments more affordable.
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Currently, some loan repayment plans are based on the borrower’s income. The “safety net” would streamline the process into one simplified option that caps payments.
Officials say, as long as borrowers make those payments, any unpaid interest won’t be added to their balance.
Another part of the plan is aimed at helping people with smaller loans of $12,000 or less. After a decade of making payments, the feds would erase any remaining debt on those loans.
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Today, ED is proposing regulations to create the most affordable & simplified income-driven repayment (IDR) plan ever for student loan borrowers, reducing the cost of federal student loan payments: https://t.co/6aYzgfQZDW— U.S. Department of Education (@usedgov) January 10, 2023
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The White House estimates a typical four-year college graduate would save about $2,000 a year in payments under the new plan. The administration believes approximately 85-percent of community college borrowers would be debt-free within 10 years.
However, there is some pushback to the plan.
According to the National Taxpayers Union Foundation, a conservative-leaning group that focuses on the impact policies have on taxpayers, the savings may not add up.
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“We’re concerned it could serve as a taxpayer funded subsidy to middle and upper-middle income borrowers who can choose a college in the future with the knowledge that they only have to repay a portion of the funds that they’re actually borrowing,” NTU’s Director of Federal Policy Andrew Lautz said.
The Department of Education still has to make public comments on the proposal before it can finalize the rules. Then, it plans to implement some provisions later this year.
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