Thread by @latimes

President Biden announced a #studentloanforgiveness package that will benefit 43 million Americans.

It includes capping income-based payments for undergraduate loans at 5% of the borrower's monthly income as long as they aren’t behind on payments.
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Some analysts believe that change may prove even more significant than the debt forgiveness.

Biden described his action as a matter of economic fairness that will “provide more breathing room for people” and boost America’s competitiveness.

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Income-driven repayment, as it’s called, has been in existence for some years, but just 32% of federal direct loan borrowers had enrolled in it as of last year, according to the College Board.

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Some attribute the limited participation to paperwork and other hoops that borrowers must go through.

And the program does not apply to those who borrowed from private lenders, even though many of those loans are backed by federal guarantees.

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Economists like the Urban Institute’s Sandy Baum have argued that repayment schedules should automatically be set on the basis of income.

“There are so many problems with the student loan repayment system; they should fix it,” she said.

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Under present law, borrowers who are on the hook for federal student loans can sign up for a repayment schedule that’s based on their current incomes, rather than the amount of their debt.

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