A vital function of the Biden administration’s student debt forgiveness plan, the restructuring of the Income Driven Repayment (IDR) plan, has been overshadowed by cries of unfairness coming from the political right, and worries that enough isn’t being done from the left.
This plan is in place to ensure that repayment of loans doesn’t cause undue burden to borrowers, and it is being significantly overhauled to benefit the American public. Perhaps the most significant change has to do with reducing the amount of a person’s yearly income made in excess of the poverty level that has to be paid towards his or her debt from 10 percent to 5 percent, meaning that someone making, say, $40,000, which is $9,400 above poverty level, would only owe $470 per year. On average, annual student loan repayments will be reduced by more than $1,000.
Additionally, the income floor is being raised from 150 percent of the poverty level to 225 percent, which means that any single person making less than $30,600 a year will not pay anything on their loans.
For the most financially vulnerable borrowers, these changes will be lifesaving. Seeing as nearly a third of all borrowers have debt but no degree to show for it, the promise of a higher-paying job as a result of attending college is of no benefit. Given the financial pressure that the COVID-19 pandemic put on many students and their families, dropout rates have spiked over the last two years, further adding to this pool of non-degree holding borrowers. The loan forgiveness plan as a whole specifically targets borrowers who find themselves in unstable financial situations, which in the grand scheme of solving the student debt crisis, seems like the most logical place to start.
In these times of economic uncertainty that we find ourselves in, and amid America’s turbulent political landscape, any amount of progress towards a more equitable future seems like a miracle. While the crux of the student debt crisis – unchecked, skyrocketing tuition prices – will more than likely remain an issue for the foreseeable future, the Biden administration’s recent announcement is, at the very least, a step in the right direction, and will serve millions of Americans in more ways than just the $10,000-$20,000 student loan forgiveness that has been so highly publicized.