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WASHINGTON (Reuters) -The Biden administration on Tuesday said it was overhauling student loan repayment plans, seeking to make payments more affordable by reducing the amount owed each month and curbing unpaid interest.
The changes would save $1,000 a year for the typical borrower and $2,000 a year on loans taken by a typical graduate of a four-year U.S. public college or university, the White House and the Department of Education said, adding that tens of millions of Americans are eligible to enroll in the plan.
President Joe Biden is pursuing sweeping student debt relief actions through various approaches even as U.S. courts have blocked certain pieces of his plan.
The U.S. Supreme Court in June blocked one rule that would have canceled $430 billion in student loan debt for 43 million borrowers, while a federal appeals court earlier this month halted a rule that would have made it easier for students who had been defrauded by for-profit colleges to have their loans forgiven.
Student loan payments were paused during the COVID-19 pandemic as shutdowns and other fallout from the spreading virus upended the U.S. economy, but have since resumed. Biden, who is seeking a second four-year term in the November 2024 election, has made shoring up the nation's economy a cornerstone of his domestic agenda.
Under the Saving on A Valuable Education (SAVE) income-driven repayment plan announced on Tuesday, the amount qualified borrowers have to pay each month on their undergraduate loans will be cut from 10 percent to 5 percent of discretionary income. About 1 million more low-income borrowers will qualify for no monthly payments at all.
Loan balances will also not grow because of unpaid interest as long as borrowers make the required monthly payments, it added. Loans could be forgiven in as little as 10 years for borrowers who qualify, down from 20 or 25 years for previous income-driven plans.
"We are continuing to pursue an alternative path to deliver student debt relief to as many Americans as possible as quickly as possible," the White House said in a statement.
The plan "will be critical for low- and middle-income borrowers, community college students, and borrowers who work in public service," the Education Department said in a separate statement. On average, the plan will cut total lifetime payments in half for Black, Hispanic, American Indian and Alaska Native borrowers, the White House added.
Data released this month showed student loan balances declined by $35 billion to $1.57 trillion in the second quarter.
(Reporting by Susan Heavey; editing by Jonathan Oatis and Heather Timmons)