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- 3 million student loan borrowers to be placed in payment pause (newsbreak.com)
Following recent legal setbacks that halted elements of a financial aid strategy, the Biden administration aims to temporarily suspend payments for approximately 3 million student loan recipients. This decision mirrors a suspension during the COVID-19 pandemic, where borrowers were not required to pay, and no interest accumulated.
This move affects the SAVE Plan, President Joe Biden’s significant effort in reforming student debt relief, now impeded by lawsuits from two Republican-led states. These legal challenges, arguing that the administration exceeded its authority, succeeded in court this Monday, stifling further progress of the plan. Initially, the SAVE Plan promised reduced monthly payments and loan forgiveness under specific conditions, benefiting 8 million users.
Courts have now blocked the reduction of payments, scheduled to drop from 10% to 5% of a borrower’s discretionary income, and halted further loan cancellations for those who have been repaying small loans for over a decade. Already, 414,000 individuals had qualified for this debt relief.
In light of a judge’s decision focusing on the monthly payment reductions, the Department of Justice, seeking an emergency halt to the ruling’s enforcement, indicated a need to freeze payments. The shift back to the original 10% rate could take months, leading to a forced pause for many borrowers.
The pause, however, does not count towards loan forgiveness eligibility under plans like the public service loan forgiveness or other long-term repayment strategies, differing from the pandemic suspension where each month did qualify.
While the freeze will not affect all enrolled in SAVE—specifically, about 4.5 million people eligible for $0 payments due to low income—the Department of Education asserts the plan’s continued benefits, such as protection from unpaid interest accrual.
The setbacks come amidst broader discussions on college debt, a crucial issue for the 2024 elections, especially after a significant debt cancellation pledge by Biden was overturned. Despite these hurdles, Biden’s administration has managed to enact debt relief for nearly 4.75 million borrowers through various means, including adjustments to existing programs and addressing college fraud.
Now, the administration explores an alternative strategy to comprehensive debt forgiveness, potentially impacting 30 million borrowers, including those already aided. This nuanced approach may offer solutions from automatic relief for those nearing default to tailored relief based on individual financial situations, with an eye on broader income and asset evaluations, and considerations for low-income grant recipients.
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- 3 million student loan borrowers to be placed in payment pause (newsbreak.com)