WASHINGTON DC — Major changes may be coming to the way you pay your federal student loans.
US Department of Education officials say a new plan will prevent people from becoming overwhelmed with debt.
Kirstin Garriss, Channel 2 Washington correspondent discussed the new plan and the potential impact on borrowers.
The new plan is called a “student loan safety net.”
Education department officials say it would cap payments on college student loans. Which means that what you owe each month would be less.
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The proposal focuses on debt payment plans that are based on your income. Currently, the federal government offers four of them.
This new proposal would streamline the process to a simplified option that limits payments.
As long as borrowers make those payments, officials say unpaid interest won’t be added to their balance.
Another part of the plan helps those with smaller loans.
For those, it would wipe out all remaining debt after a decade.
The White House estimates that a typical four-year college graduate would save about $2,000 a year in fees.
The administration believes that about 85 percent of community college borrowers will be debt free within ten years.
Opponents of the plan are concerned about the high price.
The Biden administration estimates this would cost around $138 billion over ten years.
Some critics say the cost is closer to $200 billion.
So when could you see these changes?
The Department of Education must receive public comment before it can finalize these rules.
Then plan some provisions later this year.
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