President Biden is attempting to provide student loan relief for a second time. Here’s how the new plan works
HUNTSVILLE, Ala. (WAFF) - Friday, the White House announced around 800,000 borrowers will have their student loans forgiven.
However, it isn’t being done through the HEROES Act like the original plan that was struck down by the Supreme Court. Rather, it was done as a fix to income-driven repayment plans(IDRs).
“Particularly early years of the income-driven repayment plans when they were introduced by the Department of Education. There were some glitches. It was a new program and I think they had some problems in the details of the implementation,” said. Dr. Wafa Orman, the Associate Dean for the College of Business at UAH.
IDR allows your monthly payment to be a calculated percentage of your income, accounting for family size and circumstance so that it wouldn’t hurt families going through a tough time. Depending on the plan, borrowers are eligible for forgiveness after 20 or 25 years of payments.
However, Dr. Orman says in reality, those who were eligible for forgiveness were slipping through the cracks.
“It turns out that a lot of people that could have qualified for it didn’t. Either because they didn’t know about it or because there were issues with the paperwork,” she said.
Dr. Orman says this plan addresses that. According to the White House, among those who are eligible are public servants, borrowers with disabilities, and borrowers who were taken advantage of by schools.
More importantly, the old IDR that allowed these mistakes to happen would be replaced by a new plan called SAVE, or Saving on a Valuable Education.
It would potentially keep borrowers’ monthly payments low while preventing interest from ballooning past what they would originally owe.
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