DENVER – While the Biden administration's student loan forgiveness plan faces legal challenges, it's moving forward with a new repayment plan.
The repayment plan was first announced in August, but was formally proposed by Education Department officials Tuesday.
Under existing plans, monthly payments are capped at 10% of a borrower's discretionary income, and those earning less than $20,400 a year aren't required to make payments, the Associated Press reports. The new proposal would cap payments for undergraduate loans at 5% of borrowers' discretionary pay and require payments only for those who earn more than about $30,000 a year, according to the AP.
As long as borrowers make their monthly payments, any unpaid interest would not be charged, according to the Associated Press.
Borrowers who make less than $30,500 per year wouldn’t be required to make monthly payments.
“Even before these proposed plans came about, students always wanted to know, "What do I do if I can't pay this money back? Will I lose opportunities to go to school? Do I have to pay out of pocket?"” said Kerline Eglaus, Metropolitan State University of Denver’s financial aid and scholarships executive director. “We're always eager, not only at the federal level, but also at the state level of finding out what different initiatives are going to, you know, release so students don't have to weigh in so much on the student loan debt.”
Eglaus said the plan would help many MSU Denver students facing thousands of dollars in debt.
“I'm excited about it because I'm currently a student right now, but I remember when I was in repayment, it was based off of my income. And as the income fluctuates, just because my adjusted gross income says a number does not necessarily mean that is what I can afford,” Eglaus said.
Eglaus said the university will keep a close eye on new developments over the next few weeks.
“What application process will be in place for this program? What will our lenders, the student loan lenders, what tools and resources will they be providing to borrowers as they also learn? And most importantly, when can we start seeing that relief?” Eglaus asked.
For MSU Denver junior Sebastian Sloan, relief can’t come soon enough.
“Student loans have been very expensive, like the biggest hurdle of wanting to go back to school… looking back on spending the next five years spending half of my new salary paying off that debt is going to be hard,” Sloan said. “Forgiveness would be more than helpful for me.”
This week, Ashlee Wedgeworth, who earned two college degrees, learned her student debt was forgiven.
“I was just forgiven a little over $134,000, and my degrees didn’t cost that,” Wedgeworth said.
Wedgeworth said interest added to her overall debt.
“The biggest barrier to that has been carrying that high balance on my credit report and watching that increase each year,” Wedgeworth said. “ I was fortunate to have, you know, little to no payment each month.”
Wedgeworth said that was due to having so many people living in her household. Wedgeworth said despite her debt, she still qualified to buy a home but knows that’s not the case for everyone.
“I think any (forgiveness) amount is helpful. For someone who has student loans, you know, I was 18 years old when I was applying for these loans. And no one really explains the process to you and what it means. At that age, I did not understand interest rates,” Wedgeworth said.
But not everyone is happy about the forgiveness plan.
A group of Republican-led states has been pushing the Supreme Court to block Biden’s student loan forgiveness plan. The Supreme Court will listen to oral arguments on Feb. 28.