While that may be true, the president’s hard work has been met with opposition at every turn. Biden’s latest actions to provide debt relief and support for student loan borrowers were announced after the Supreme Court stymied the president’s efforts to provide relief to around 37 million borrowers.
CNBC reported that the ruling in favor of the GOP-led lawsuits filed against Biden’s sweeping student loan forgiveness program will result in the “largest number of borrowers on record ever to enter repayment simultaneously,” according to a Consumer Financial Protection Bureau (CFPB) spokesperson.
As a result, more borrowers than ever before will need help to pay their bills when repayments resume. The latest support effort from Biden and the Department of Education aims to protect the most vulnerable borrowers by providing a temporary “on-ramp” that will allow many borrowers to skip repaying their loans without serious consequences for a year.
“The Department (of Education) is instituting a 12-month ‘on-ramp’ to repayment, running from October 1, 2023, to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies,” read the Fact Sheet.
According to a July survey from U.S. News and World Report, 46% of borrowers need more financial preparation to restart their federal student loan payments in October. Additionally, 30% are still determining when their payments will resume and 48% need to see the amount of their fees.
The “on-ramp” initiative may ease borrowers’ financial pain, but it is temporary aid. Although the damaging consequences of missing your loan payments will be waived until September 30, 2024, interest will continue accumulating during the “on-ramp” period.
A one-year grace period on loan repayment will benefit the financially sensitive. Still, the Biden-Harris administration has provided another option for vulnerable borrowers in the form of a new income-driven repayment (IDR) program which replaces the Revised Pay as You Earn (REPAYE) IDR plan — the Saving on a Valuable Education (SAVE) plan.
“Borrowers will start saving money under the new plan, which will cut monthly payments to $0 for millions of borrowers making $32,800 or less individually (the cutoff is $67,500 for a borrower in a family of four),” said Education Secretary Miguel Cardona in multiple emails to borrowers last month, per Forbes. The new plan will “save all other borrowers at least $1,000 per year” in payments, he said.
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