What you need to know to help you make it.
This week's newsletter was written by Ryan Ermey, a senior reporter covering money and investing for CNBC Make It. You can follow him on Twitter @RyanErmey. By now, you've probably seen the headline provisions in President Joe Biden's student loan forgiveness program enough to know them by heart: $10,000 in relief for federal student loan borrowers making less than $125,000 per year; $20,000 if you have Pell Grants. But delve further into the plan, and you'll find a "sleeper" detail — one that could be "a game changer" for millions of borrowers with remaining balances, Julie Peller, executive director at higher education nonprofit Higher Learning Advocates, told CNBC Make It's Jennifer Liu. The often overlooked part of the rollout: proposed changes to income-driven repayment plans. The Department of Education's plan would: |
- Cap monthly payments on undergraduate debt at 5% of discretionary income, down from the 10% to 15% requirement on existing plans.
- Raise the threshold for what is considered nondiscretionary income. The White House says this will guarantee anyone earning less than a $15 per hour wage will not have to make a monthly payment.
- Cover accrued unpaid interest, ensuring that no borrower's balance would grow if they make qualifying on-time payments.
- Forgive loan balances after 10 years of payments, instead of the usual 20, for those with original balances of $12,000 or less
Liu looked into how the changes would affect borrowers on the ground. One borrower Liu interviewed is 34-year-old Justin Short, who graduated from the University of Missouri in 2012 with a degree in hospitality management and $47,000 in federal loans. In 2020, his monthly loan payment was $690. Under the new rules, and given a slightly lower current salary, he'd owe about $200 per month. "I wish people were talking about this more than the $10,000 piece," Short told CNBC Make It, "because this will put more money into the pockets of everyday, middle-class Americans who need that extra help, especially when student loan payments resume on Jan. 1." Experts say the plan could roll out as soon as summer 2023. By then, the Biden administration will have to hammer out who will be eligible for the program, which types of loans qualify and how people will be able to enroll. For a more detailed breakdown of how the proposal could impact borrowers' finances, check out the full version of Liu's story on CNBC Make It. |
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