: Debt cancellation got all the attention, but this Biden proposal could impact student-loan borrowers more, critics and advocates say

by | Oct 1, 2022 | Stock Market

When President Joe Biden announced in August that his administration planned to cancel $10,000 in federal student debt for most borrowers, Allison Daurio felt some relief.  Under the White House’s debt forgiveness plan, Daurio , 29 would see about one-quarter of her student loan balance wiped away. But as she read more closely through the proposal, Daurio realized that another detail would likely have a bigger impact on her life: the Biden administration’s plan to make sweeping changes to the way borrowers repay their student loans. 

“I felt that was a bigger story,” Daurio said of the proposed reforms. Student-loan policy experts — both supporters and detractors of the Biden administration’s debt relief initiative — also believe that the White House’s proposed new income-driven repayment plan, known as IDR, could reshape the student loan system. Officials haven’t released the details of their proposed changes to the government program that allows student-loan borrowers to pay back their debt as a percentage of their income. But if the pieces of the plan officials have already outlined come to fruition, it could radically change the experience of repaying student loans for millions of borrowers.

Allison Daurio thought the Biden Administration’s proposed changes to income-driven repayment would have a bigger impact on her life than debt forgiveness.

Senator Elizabeth Warren, a Democrat of Massachusetts, called the plan “potentially transformative,” in a September speech to student-loan borrower advocates.  “This is not just about can we get the president to do a one time cancellation,” Warren said. “This is about how we reform how we think about paying for post-high school education.”  Income-driven repayment is a decades-old feature of the student loan system, but in August, the Biden administration pitched a new version of the repayment scheme. The government first offered the payment scheme as an option on some fe …

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