Good news for student loan borrowers! Starting this December, the Biden administration is reopening enrollment for two repayment plans—Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR).
These options are designed to provide financial relief and a clear path to reducing or even eliminating student debt.
The Context: SAVE Plan Uncertainty
The Biden administration’s Saving on a Valuable Education (SAVE) plan has been a game-changer for borrowers, offering reduced payments and full forgiveness after 10–25 years of consistent payments.
However, the SAVE plan is currently facing legal challenges, putting its future in limbo. While it continues to help borrowers who enrolled before the litigation began, new enrollments in older plans like PAYE and ICR were paused when SAVE was introduced.
In response to these uncertainties, the Department of Education (DOE) is reinstating these plans, ensuring borrowers still have viable, income-driven repayment options.
PAYE and ICR: What They Offer
PAYE (Pay As You Earn)
This plan is tailored for borrowers with financial need, offering the following benefits:
- Lower Monthly Payments: Payments are capped at 10% of discretionary income.
- Forgiveness Timeline: Outstanding debt is forgiven after 20 years of qualifying payments.
ICR (Income-Contingent Repayment)
ICR provides flexibility for borrowers, especially those with family obligations:
- Income-Based Payments: Monthly payments are set at 20% of discretionary income or the amount you’d pay on a 12-year fixed plan—whichever is lower.
- Broader Eligibility: Available to all federal student loan borrowers.
- Forgiveness After 25 Years: Remaining debt is forgiven after consistent payments over 25 years.
Why Reopen PAYE and ICR?
The reinstatement of these plans reflects a strategic response to the legal challenges surrounding the SAVE plan.
Borrowers who don’t qualify for SAVE or who need more tailored options can now benefit from PAYE and ICR. These reopened plans ensure that no borrower is left without a feasible repayment solution.
Biden’s Commitment to Student Loan Relief
Under President Biden, the Department of Education has forgiven over $175 billion in student loans, helping nearly 5 million people.
This includes targeted debt relief for borrowers in public service, those defrauded by for-profit schools, and individuals with permanent disabilities.
The reopening of PAYE and ICR reflects the administration’s dedication to ensuring borrowers have access to sustainable repayment solutions, even as legal disputes continue.
What’s Next for Borrowers?
The Department of Education has confirmed it will release more details as it finalizes the enrollment process for PAYE and ICR. If you’re a borrower considering these plans, keep an eye out for updates from the DOE.
Meanwhile, the SAVE plan will continue to benefit existing participants while it undergoes legal scrutiny. Those pursuing Public Service Loan Forgiveness (PSLF) should also explore how these plans may intersect with their goals.
For borrowers struggling with student debt, these reopened plans offer renewed hope and flexibility. Whether you’re seeking lower monthly payments or aiming for long-term forgiveness, PAYE and ICR provide viable paths to financial freedom.
