Last week the Supreme Court ruled that President Biden cannot merely use a magic wand and cancel student loans, which would have handed the bulk of his supporters billions of dollars. Now that he’s been blocked by the Courts, he’s got to try and buy votes a different way.
While he can’t just cancel the loans, he can delay when debtors have to pay the loans back.
The U.S. Department of Education will institute a 12-month “on ramp” to repayment, which will run from Oct. 1, 2023, to Sept. 30, 2024. During that period, borrowers will be shielded from the worst consequences of missed payments, reports CNBC.
Borrowers may need that leeway: The Consumer Financial Protection Bureau recently warned that roughly 1 in 5 student loan borrowers could struggle when their payments resume.
President Joe Biden announced the provision easing borrowers back into repayment on Friday afternoon, hours after the Supreme Court struck down his student loan forgiveness plan.
Before the ruling, the Biden administration said that resuming student loan payments without being able to carry out its debt forgiveness could trigger a historic spike in defaults and delinquencies.
In the wake of the Supreme Court ruling, Senate Republicans have offered their own plan to tackle student debt.
The GOP package, The Hillwrites is “called the ‘Lowering Education Costs and Debt Act,’ consists of five bills that the senators say will address the root causes of the student debt issue such as the increasing price of college and students taking out loans they can’t afford.”
The first two bills in the package aim to improve the information given to students before they decide on attending college. The “College Transparency Act (CTA)” reforms the college data reporting system, making sure students have access to accurate and comprehensive information about outcomes at different schools. This helps students make informed choices when selecting a university. The “Understanding the True Cost of College Act” standardizes the format of financial aid letters, providing a breakdown of aid so students can easily compare offers and understand the financial implications associated with their education.
The remaining three bills focus on student loans, addressing the information given to borrowers and limitations on borrowing. The “Informed Student Borrower Act” improves loan application processes by requiring students to acknowledge receipt of student loan entrance materials and participate in entrance counseling. Students receive annual materials detailing the projected repayment time, monthly payment amounts, and potential earnings associated with a specific school and program. The fourth bill simplifies the student loan repayment process by reducing the options available from nine to two. The standard 10-year repayment plan remains, and the REPAYE program changes. The bill also prevents loans from being granted to programs with lower earning potential. The final bill ends Graduate PLUS loans to reduce student loan debt, while alternative loan options such as Stafford loans remain available with borrowing limits in place for graduate education.