The United States Department of Education recently introduced new regulations to improve the student loan repayment system. The proposal aims to lower undergraduate loan payments and prevent unpaid interest from increasing loan balances.
“The Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” said U.S. Secretary of Education, Miguel Cardona.
“We cannot return to the same broken system we had before the pandemic,” Cardona added. “At that time, one million borrowers defaulted on their loans each year. Rising interest also left many borrowers owing more than they originally borrowed.”
New Income-Driven Repayment Plan (REPAYE Changes)
The proposal would revamp the Revised Pay As You Earn (REPAYE) plan to create a new, more affordable income-driven repayment (IDR) option. It simplifies the program and removes common barriers that slow borrowers’ progress toward loan forgiveness.
“These proposed regulations will cut monthly payments for undergraduate borrowers in half,” Cardona said. “They will also create faster pathways to forgiveness.”
Key features include:
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$0 monthly payments for single borrowers earning under $30,600 per year.
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$0 payments for families earning under $62,400 per year.
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Monthly undergraduate payments cut in half, from 10% to 5% of discretionary income for borrowers who do not qualify for $0 payments.
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Prevents unpaid interest from growing balances, even for borrowers making minimal or $0 payments.
These changes could significantly reduce long-term costs. For example:
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Future borrowers could see total payments per dollar borrowed drop by 40%.
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Borrowers with the lowest projected lifetime earnings could see payments drop by up to 83%.
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Graduates from a typical four-year public university could save nearly $2,000 per year.
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A first-year teacher pursuing Public Service Loan Forgiveness could save more than $17,000 in total payments.
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About 85% of community college borrowers could become debt-free within 10 years.
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On average, Black, Hispanic, American Indian, and Alaska Native borrowers could see lifetime payments cut in half per dollar borrowed.
The Department is currently working on a proposed gainful employment regulation that would cut off federal financial aid to career training programs that fail to provide sufficient financial value, and they would also require warnings for borrowers who attend any program that leaves graduates with a large amount of debt.
This proposal will also include avenues to strengthen the conditions that can be placed on institutions that fail to meet the requirements of the Higher Education Act or exhibit signs of risk.
Least Financial Value List
A list is also being compiled by the United States Department of Education to inform students of programs at all types of colleges and institutions that offer the least financial value to them.
The Department is requesting information to seek formal public feedback on the best way to identify the programs that fall into the category the list entails.
Once the list is published, institutions with programs on the list will be requested to submit improvement plans to the Department to improve their financial value.
You can view an unofficial copy of the proposed IDR regulation here and a fact sheet with further information here. Public comments on the provisions may result in changes being made. The Department is hoping to finalize the rules later this year and aims to start implementing some provisions during the same time frame. 
