How are income-driven repayment plans changing?
President Biden’s administration has been exploring a few changes to income-driven repayment plans. The biggest change to the plans is that between 2021 and 2025, borrowers who have their balance forgiven on an income-driven repayment plan will not owe taxes on the forgiven amount. Previously, borrowers could be met with a large tax bill at the end of their repayment period.The Department of Education is also considering a new income-driven repayment plan, currently called Expanded Income-Contingent Repayment (EICR). EICR would cover only undergraduate loans, but it would introduce a marginal approach to payment calculations. With the new plan, any discretionary income that falls below 200 percent of the federal poverty line would not be charged.Discretionary income between 200 and 300 percent of the federal poverty line would be charged 5 percent, and discretionary income above 300 percent of the federal poverty line would be charged 10 percent. Borrowers would make these payments for 20 years.