'Student loan safety net' proposed by feds, alongside forgiveness

WASHINGTON — The White House is moving forward with a proposal that would lower student debt payments for millions of Americans now and in the future, offering a new route to repay federal loans under far more generous terms.

President Joe Biden announced the repayment plan in August, but it was overshadowed by his sweeping plan to slash or eliminate student debt for 40 million Americans. That one-time debt cancellation plan faces an uncertain fate before the Supreme Court.

Some education experts see the repayment plan as a more powerful tool to make college affordable, especially for those with lower incomes. Education Department officials on Tuesday called it a “student loan safety net" that will prevent borrowers from getting overloaded with debt.

“Student debt has become a dream killer,” Education Secretary Miguel Cardona said. “This is a promise to the American people that, at long last, we will fix a broken system and make student loans affordable.”

The Education Department formally proposed the new plan on Tuesday by publishing it in the Federal Register, starting a public comment period that often takes months to navigate.

If finalized, it would give a major overhaul to income-driven repayment plans — one of several payment options offered by the federal government.

The resulting plan would have lower monthly payments, an easier path to forgiveness, and a promise that unpaid interest won't be added to a borrower’s loan balance.

"The burden is the interest," said Marian Conway, 67, of Lindenhurst, who volunteers on the board of the SUNY Empire Foundation. She is a SUNY Empire State College alumnus who has student loans.

" ... The interest can double and triple the amount the borrowers have to pay back, burying them in debt," Conway said.

SUNY Empire State College, with locations statewide, including in Selden, focuses "on educating students at any stage of life or learning," according to its website.

Conway said the majority of students there "are like I was, nontraditional students who work and, often, have families to support. Student loans are layered on top of life's other expenses and become crushing." 

Plan's details

The federal government now offers four types of income-driven plans, but the proposal would mostly phase out three of them while focusing on one simplified option.

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 new proposal would cap payments for undergraduate loans at 5% of borrowers’ discretionary pay, cutting their bills in half, and require payments only for those who earn more than about $30,000 a year.

As long as borrowers make their monthly payments, any unpaid interest would not be charged.

The proposal also would make it easier to get debt erased after making several years of payments.

Existing plans promise to cancel any remaining debt after 20 or 25 years of payments. The new plan would erase all remaining debt after 10 years for those who took out $12,000 or less in loans. For every $1,000 borrowed beyond that, a year would be added.

Typical graduates of a four-year university would save about $2,000 a year compared with today’s plans, the Biden administration says, while 85% of community college borrowers would be debt-free within 10 years.

Presidents of both county community colleges on Long Island stressed the importance of affordable community colleges as economic engines giving students access to higher education and career preparation.

"Any actions that increase affordability and lessen the financial strain on students and their families are welcome,” said Suffolk County Community College President Edward Bonahue.

Maria Conzatti, acting president of Nassau Community College, said in light of the region's urgent need for skilled workers in many fields, "Any initiative that helps to relieve the debt burden on students and to make a college education more affordable and accessible would be tremendously beneficial for our community."

Praise and criticism

The Institute for College Access and Success, a nonprofit organization that promotes college affordability, praised the proposal.

“The changes proposed today would provide meaningful financial relief to millions of borrowers and help shield students from debt that has not [been] paid off, including those who start college but do not complete a degree,” said Sameer Gadkaree, the group's president.

Matthew Colson, spokesman for Farmingdale State College, said the changes would serve many graduates there. While over 55% graduate with "little to no debt, that still leaves plenty who have. The income-driven approach is particularly helpful to our recent grads who are gainfully employed though for some at modest salaries as early career professionals." 

Opponents on the right criticize the revamped plan as an unfair handout with a steep price tag. The Democratic Biden administration estimates it would cost nearly $138 billion over the decade, and some critics have put it closer to $200 billion.

Republican Rep. Virginia Foxx, chairwoman of the House Committee on Education and the Workforce, said the proposal turns the federal loan program into "an untargeted grant with complete disregard for the taxpayers that fund it.” 

Even some on the left have questioned the prudence of the idea, saying it's so generous that it effectively turns student loans into grants that don’t need to be repaid. That could lead more students to borrow, they warn, and it could spur colleges to raise tuition prices if they know students won’t be on the hook. 

Still others have urged the administration to abandon income-driven payment plans entirely, calling them a failed policy.

With Carol Polsky