The important fine print on student loan relief

Getting $10,000 or $20,000 knocked off your student debt balance is a big deal — but other parts of the student loan relief plan Biden announced last week aim to keep people from drowning in debt in the first place.

Why it matters: Biden's proposal would lower required monthly payments on federal loans and forgive some of the interest borrowers can't afford to pay.

• Those changes are "going to be monumental for borrowers moving forward over time," Washington state student loan advocate Stephanie Sampedro told Axios this week.

Details: Currently, people on income-driven repayment plans generally must pay 10% of their discretionary income toward their student loans.

• That figure would be lowered to 5% under a new repayment plan the Biden administration is developing in the coming months.
• What's more, the government plans to reduce how much of a borrower's income is viewed as discretionary, so that the 5% calculation would result in an even smaller monthly payment.
• People earning below 225% of the federal poverty level would have monthly payments of $0.

This part's a big deal: If those monthly payments won't cover borrowers' interest, the government will step in and pay the difference.

• That will prevent people's student loan balances from ballooning due to accruing interest, a challenge many borrowers face even as they make regular payments, Sampedro said.
• "I hear from so many borrowers, 'if they could just get rid of the interest, I could afford to pay off my debt — it's just the interest is killing me," Sampedro added. "So I think that is a huge solution to that problem."
• Biden's plan also would forgive debt balances of up to $12,000 after 10 years of regular payments, as opposed to 20 years.

Yes, but: Republicans and others have criticized Biden's relief plan as a giveaway that leaves out people who never went to college, without addressing the underlying problem of high tuition.

• "Students wouldn't rack up as much debt if tuition was lower," Washington state Senate Republican leader John Braun said yesterday in a news release.

What's next: The details of the new repayment plans aren't set in stone. The administration needs to go through a rulemaking process expected to begin soon, Sampedro said.

• Thereafter, the new repayment plan is expected to go into effect in July of next year.