“The day the Biden administration unveiled its highly anticipated student loan forgiveness plan was a ‘celebratory day’ for Justin Short.
Short, 34, graduated from the University of Missouri in 2012 with a degree in hospitality management, $47,000 in federal student loans and $5,800 in private student loans. Like many borrowers, his college debt has plagued his personal and financial decisions for years.
So while he found relief in many of the announcements coming from the White House on Aug. 24 — $10,000 in debt forgiveness, another payment pause extension through the end of the year — Short was most interested in the announcement of proposed changes to income-driven repayment plans.
The Department of Education’s new plan would cap monthly payments on undergraduate debt to 5% of discretionary income, down from the usual 10% to 15% on existing plans.
The proposal also raises the amount of money considered non-discretionary income and shielded from being used to calculate student loan payments.
It would cover any accrued unpaid interest so that no borrower’s balance would grow if they made a qualifying payment.
And it would forgive loan balances after 10 years of payments, instead of the usual 20, for those with original loan balances of $12,000 or less
This ‘sleeper’ detail of the loan forgiveness plan could be ‘a game-changer’ for millions of borrowers with remaining balances, says Julie Peller, executive director at Higher Learning Advocates, a bipartisan higher education nonprofit.
‘I wish people were talking about this more than the $10,000 piece,’ Short says, ‘because this will put more money into the pockets of everyday, middle-class Americans who need that extra help, especially when student loan payments resume on Jan. 1.’
‘This has huge implications,’ he adds.”