The Biden administration today released a detailed plan that will make it easier for student-loan holders to wipe out their debts using income-driven repayment plans, the Wall Street Journal reported. The proposed rule from the Education Department is a key step in overhauling the $1.6 trillion federal loan program that has left millions with ballooning debts. The administration first announced the change in August when it unveiled its plan to cancel up to $20,000 in student debt for qualifying borrowers. The Supreme Court plans next month to take up a challenge to that broader debt-forgiveness, which is frozen after being blocked by lower courts. Income-driven repayment plans were designed to help lower earners borrow for college, but few have been able to use them effectively because of technical problems and onerous amounts of income-verification paperwork. If enacted, the proposed changes would provide qualifying borrowers with significantly more-generous options that could leave them debt-free sooner, while paying off only a fraction of their total loan balances. To prevent student-debt balances from ballooning in the future, the administration plans to halve, to 5% from 10%, the amount of discretionary income borrowers must pay each month on their undergraduate loans if they are enrolled in an income-driven repayment plan. Borrowers with incomes below 225% of the federal poverty line wouldn’t have to make monthly payments on their loans. The administration estimated that that level corresponds to an individual income of less than roughly $30,600 annually or any borrower in a family of four who makes less than about $62,400 a year.
