WASHINGTON — Following the Supreme Court’s summer ruling against 40 million federal student loan borrowers who would have qualified for debt relief, the Biden administration crafted a year-long delay in repayments.
The policy, known as an on-ramp, is set to begin next month.
Additionally, hours after the Supreme Court’s decision, the Department of Education unveiled a new repayment plan for those with federal student loans, known as Saving on a Valuable Education, or SAVE. The new income-driven repayment plan calculates payments based on a borrower’s income and family size and forgives balances after a set number of years.
It’s estimated by the administration that more than 20 million borrowers will benefit. Borrowers can apply here. A campaign is being launched to publicize the new program, by the Department of Education in collaboration with groups like the Student Debt Crisis Center, UnidosUS and the NAACP.
“This plan is a game changer for millions of Americans, many of whom are putting off having children, buying their first home, or even starting a business because they can’t get out from under their student loans,” said White House Domestic Policy Advisor Neera Tanden on a call with reporters on Monday. “Student loans will be manageable.”
Last year, the Biden administration rolled out a debt forgiveness plan for borrowers with federal student loans that would have been a one-time cancellation of up to $10,000. Borrowers who had received Pell Grants — federal aid to help low-income students pay for higher education — could qualify for an additional $10,000 in forgiveness.
The conservative bloc of the Supreme Court on June 30 ruled that the Biden administration did not have the legal authority to enact that one-time student debt relief program. The case was filed by Republican attorneys general of Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina, and they argued the Biden administration overstepped its reach.
Following that decision from the court, the Biden administration initiated rulemaking through the Higher Education Act to try again to enact debt relief, and finalized a rule for the new repayment plan known as SAVE.
Here are some questions and answers about the on-ramp policy and SAVE plan.
When does the on-ramp program start?
Federal student loan repayments are set to resume in October, but while borrowers have a year of leniency to begin repayments, interest will continue to accrue starting in September. The on-ramp program starts Oct. 1 and will extend until Sept. 30 of next year.
“Financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies,” according to a fact sheet released by the White House.
The Department of Education did not respond to questions from States Newsroom asking how the agency would prevent loan servicers from reporting borrowers to credit bureau or debt collectors.
How is the on-ramp policy different from the pause on federal student loan repayments?
The pause on federal student loan repayments was first put in place by the Trump administration in 2020 at the start of the coronavirus pandemic, and has been extended several times.
