Student Loan Forgiveness: Will You Qualify for $0 Payments Under Biden’s New Plan?

A stack of one hundred dollar bills in a money wrapper labeled "Student Loan" on top of a blue graduation cap.
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With the legality of President Biden’s broader federal student loan forgiveness program in question, the U.S. Department of Education (ED) has proposed revisions to income-driven repayment (IDR) plans that could result in considerable cuts to loan payments. In fact, some borrowers will have $0 monthly payments.

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The ED-proposed regulations will amend the Revised Pay As You Earn Repayment (REPAYE) plan and phase out the three other existing IDR plans available to lower-income debtors — Pay As You Earn Repayment (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) plans.

Borrowers participating in existing IBR, ICR and PAYE plans will follow the new plan when enacted into law, but will need to enroll through their student loan provider or through the Federal Student Aid site. The new proposed regulations do not include changes to accommodate those holding Parent PLUS loans, which are not repayable on an IDR plan.

To qualify for $0 monthly payments, borrowers must make less than around $30,600 a year, while individuals in families of four much make less than roughly $62,400, per the ED press release.

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“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” U.S. Secretary of Education Miguel Cardona said in a statement.

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As Business Insider reported, undergraduates will have their payment obligations slashed in half, as the new plan will revise the required discretionary income payment from 10% to 5%. Those holding graduate loans will continue to pay 10%, and those with an existing mix of graduate and undergraduate loans will have to pay between 5% and 10%.

The current REPAYE plan calculates discretionary income as any money earned over 150% of the federal poverty guidelines, which are used to determine your eligibility for certain programs and benefits, according to CNBC. Under the new regulations, borrowers won’t be required to make payments based on income over 225% of the federal poverty guidelines.

The Biden administration is attempting to correct what it deems is a flawed IDR plan system and a wider problem with never-ending debt payments. If enacted, the new REPAYE legislation would enable many borrowers with original federal student loans of $12,000 the opportunity to pay it off after 10 years. Leftover debt after 20 years of payments will be forgiven, as it is now under REPAYE plan rules.

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“We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed,” said Cardona.

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About the Author

David Nadelle is a freelance editor and writer based in Ottawa, Canada. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry.
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