WASHINGTON — The Education Department is alerting students about the Biden administration’s student debt repayment plans about a shift that would “simplify” programs for millions.
About 7.5 million individual student borrowers will have 90 days to exit the Biden SAVE plan starting July 1, Education Undersecretary Nicholas Kent told The Washington Post in an interview.
In total, SAVE borrowers hold about $365 billion in outstanding debt, according to an Education Department spokesperson.
“We have over 40 payment and discharge options currently, and the system has become very complex and very difficult to understand,” Kent said, describing the options as a “Frankenstein model.”
“One of the purposes of the Working Families Tax Cuts Act is to simplify the payment process, so whether or not you have a degree in pipefitting or you have a doctorate in philosophy, it’s understandable and easy to navigate,” he added.
Different segments of students will be contacted by loan servicers and then have 90 days to enter one of the Trump administration’s two repayment plans for student borrowers. The Biden administration plans to close completely by July 1, 2028.
Kent noted that more than 300,000 SAVE borrowers have already switched to the Trump administration’s version of the income-driven repayment plan, known as the Repayment Assistance Plan (RAP).
He added that if millions of borrowers seek to abandon their plan all at once, this “will create a kind of bottleneck, and we do not want that. Rather, we want to support borrowers.”
“We started reaching out to borrowers earlier this year to let them know that this plan was no longer an option and they needed to move to a new statutory repayment plan and so we ran two campaigns at the Department for Education, one this spring, one last month, and we will do a final campaign this month before we hand it over to providers,” Kent added.
A federal appeals court struck down an income-driven repayment plan in March that was expected to cost taxpayers up to $475 billion by 2033.
RAP enrollees will have to pay between 1% and 10% of their earnings based on their adjusted gross income to meet the minimum monthly payment, and their debts will be canceled after 30 years if they are not paid in full.
Education Ministry officials said some borrowers in the past had complained of a negative return on investment.
“If you’re a RAP borrower and you’re making your payments on time the way you should, you’ll always see your balance go down,” Kent reassured.
The other plan, known as the Standard Tiered Plan, would now extend the typical 10-year window for repaying student debt to up to 25 years in some cases, according to Kent.
He also said, “The Biden admin did it to themselves and then they got caught in a lawsuit, and now we have to deal with these seven million students who I’m sure are frustrated and confused.”
“Our repayment plans are mandated by Congress, which means they’re not going away anytime soon, and, you know, obviously they’re going to be able to withstand any judicial scrutiny that might occur,” Kent said.
“It’s about putting the responsibility back on Congress, less about, you know, the department doing whatever the hell it wants.”