Under Biden's new plan, most college borrowers won't repay loans
Don't save for college. Don't choose a cheaper alternative. Unless you become a very higher earner very quickly, you'll make only "symbolic payments" on your federal student loans under President Biden's proposed REPAYE (Revised Pay As You Earn) plan , writes Andrew Gillen, a senior policy analyst at the Texas Public Policy Foundation, on Minding the Campus.
"The first income-driven repayment program (established in 1994) set payments at 20% of income above the poverty line," Gillen writes. "Later income-driven programs set payments at 10–20% of income above 150% of the poverty line. Biden is setting payments at just 5% of income above 225% of the poverty line."
Recent bachelor’s degree graduates earn a median of $47,000, and among borrowers, the median amount borrowed was $24,000. The median student would have a monthly payment of $68, and his annual payments ($816) wouldn’t even cover the interest on his loan ($1,200). Thus, the median bachelor’s degree graduate will repay none of what he borrowed and will have about one-third of the interest waived as well.
"Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40%," according to the U.S. Education Department.
Payments go to $0 for single borrowers who learn less than $32,800, reports CNBC, while those earning less than $40,000 a year would pay $30 a month, down from $151 under the current plan. Graduates who make $90,000 a year "could see their monthly payments shrink to $238 from $568."
Colleges will be able to keep on increasing tuition -- and hiring more administrators, writes Chance Layton, communications director for the National Association of Scholars. The taxpayers will pick up the bill. "As we explain in our report Priced Out," administrative "bloat directly increases tuition and, thus, income from Federal student loan and grant programs."