Millions of student loan borrowers will have to find a new repayment plan soon. The available repayment plans will mean higher monthly payments for most.
More than 7 million student loan borrowers who signed up for the Biden-era SAVE plan to repay their debt must find a new plan for repayment, the Education Department announced Friday. The news from the Education Department comes after a federal court struck down the SAVE plan earlier this month.
Loan servicers will issue notices to SAVE plan enrollees starting July 1, giving them 90 days to select a new repayment plan. Borrowers will be contacted by their loan servicers in stages, with a new group getting notified every two weeks. Those enrolled in the SAVE plan the longest will be the first to receive notices.RELATED: Treasury Department taking over student loans: What to know"The days of unlawful loan forgiveness are behind us," Under Secretary of Education Nicholas Kent told The Associated Press. "Let me be clear, the Trump administration’s perspective is that when a student takes out a loan, they are responsible for repaying it."The available repayment plans will mean higher monthly payments for most of those borrowers. Critics of the changes say higher payments will only exacerbate the rising "affordability crisis" and force students into repayment plans with "no good options."RELATED: Trump administration delays plan to withhold pay for borrowers in default"Over and over again, education officials of both parties made promises about fixing the broken student loan system and called student debt a crisis," Mike Pierce, executive director of the Student Borrower Protection Center, said. "And yet today, these same borrowers are being told it’s time to pay and you have no good options.""You’re talking about a pressing current affordability crisis, and you took away the most affordable plan option," Alexander Lundrigan, policy and advocacy manager at Young Invincibles, an advocacy group, told the AP. The SAVE plan was among several initiatives launched by President Joe Biden to reduce Americans’ student debt burden.The SAVE plan provided more lenient terms than other repayment plans, reducing loan payments to as little as 5% of a borrower’s discretionary income and offering forgiveness for borrowers who made payments for at least 10 years and originally borrowed $12,000 or less. The most forgiving income-based repayment plan now is calculated off at least 10% of an individual’s discretionary income.SAVE plan enrollees haven’t had to make payments while the court challenges were pending. But debt balances began accruing interest following a court ruling last summer, which means some students will owe more when they resume payments. Last year, the Trump administration and Congress made several changes to student loan repayment options that will take effect over the next two years. For one, new student loans will no longer have the option of deferment because of unemployment or economic hardship.
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