In the event that President Joe Biden needs a plan B to provide student loan forgiveness to tens of millions of Americans, his administration is working on a plan.
His debt forgiveness plan, which he proposed last August, has been through battles of criticism with Congress, then he vetoed a GOP plan to cancel the forgiveness plan.
Now the plan faces two legal hurdles with two lawsuits in the Supreme Court.
If struck down by the Supreme Court by early July, the Department of Education may consider overhauling income-driven repayment plans (IDRs), the idea of which was introduced also last August, CBS News reported, but was overlooked by Biden’s plan.
IDRs could help lower- and middle-income borrowers by fixing a person’s monthly payment to their income. Pew Research said approximately 1/3 of borrowers are enrolled in IDR.
Critics are attacking the plan B because four IDRs exist and each has different rules and criteria to follow. On Tuesday, Biden administration officials said three IDR plans would be phased out and one program focused on as Plan B. Revised Pay As You Earn or REPAYE was introduced in 2016. REPAYE increases the amount of income protected from debt repayment.
Current regulations cancel remaining debt after 20 or 25 years of payments, but new regulations would cancel debt after 10 years for those who borrowed $12,000 or less. Community college students would be most helped by this type of debt plan. The DOE estimates that 85 percent of community college borrowers would be debt-free within 10 years with an IDR plan.
The revised plan, which could be finalized later in 2023, would exclude individuals who took out a Parent PLUS loan. Overhauling the IDR plans could cost taxpayers as much as $190 billion.
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Rebecca Barnabi
