Education Department proposes cutting student loan repayments in half
Students who take out less than $12,000 or less would have all of their debt canceled after 10 years under the new plan.
The Education Department announced Monday a proposal to cut undergraduate student loan repayments in half and stop unpaid interest from being charged.
Right now, borrowers earning less than $20,400 annually do not have to make student loan payments and monthly payments are limited to 10% of a borrower's discretionary income, according to the Associated Press.
The new plan would not require payments from borrowers making less than $30,600 a year and the monthly payments will be capped at 10% of a borrower's income.
"Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before," Education Secretary Miguel Cardona said. "We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed."
The proposal would also ensure that borrowers making monthly payments will not be charged unpaid interest. It is unclear whether interest will be charged to those not making payments due to their income level.
Students who take out less than $12,000 or less would have all of their debt canceled after 10 years while every additional $1,000 borrowed would add a year until the debt is canceled under the new plan.