Income Driven Repayment Plan Final Rule
Student loan debt prevents people of color, low-income and first-generation students from accessing the wealth-building opportunities that higher education is meant to provide, and we know that needs to change. In our pursuit of economic justice and educational equity, we welcome the Department of Education’s final rule to improve Income Driven Repayment (IDR) plans, especially after the disappointing Supreme Court ruling on student loan forgiveness last month. These regulatory changes seek to alleviate the burden of student loan debt, a critical national imperative. As a nationwide organization harnessing the power of its membership network to ensure young people of color have the opportunities to build generational wealth and thrive, we appreciated the opportunity to uplift the voices of our members and comment on these proposed reforms. We are pleased that the final rule retains features we highlighted in our comments that will help more borrowers avoid default and better afford student loan payments.
The final rule introduces significant modifications to the REPAYE Plan, which will now be known as "Saving on a Valuable Education (SAVE)."
Some of the key aspects of SAVE that will reduce the economic hardships faced by communities of color include:
Reducing monthly payments to 5 percent of borrower discretionary income for those with outstanding undergraduate loans and ten percent for graduate loan holders.
Raising the discretionary income threshold to 225 percent of the Federal poverty level, significantly easing monthly loan payments along with ensuring that borrowers with income below this threshold will have a $0 payment.
Ending the charging of unpaid accrued interest each month.
Streamlining loan forgiveness for borrowers with original balances of $12,000 or less. These borrowers will receive forgiveness after 10 years, and for each additional $1,000 above $12,000, borrowers will achieve forgiveness after 12 monthly payments, up to $22,000.
Extending repayment options for borrowers in default, allowing deferment and forbearance periods to count towards forgiveness, and offering an opportunity for catch-up payments to ensure periods of deferment are counted toward forgiveness.
To benefit borrowers immediately, the Biden Administration has initiated early implementation of key provisions, including the exclusion of spousal income from SAVE calculations for borrowers filing taxes separately, an increase in the income exemption to 225 five percent of the Federal poverty level, and no charging of accrued interest for borrowers in the program. The rest of the provisions are slated to go into effect on July 1, 2024.
We commend the Biden Administration’s final rule as a crucial step towards equity and justice, but we know there is more work to be done. As we continue striving for the economic empowerment of young people of color, we look forward to continuing to engage with the Department of Education to ensure the effective implementation of IDR plans.
If you are interested in learning more about EdLoC’s policy work, please contact Angelica Solis-Montero, Chief Policy Officer at asolismontero@edloc.org.
