54,600 Iowans enroll in new income-based student loan repayment program

DES MOINES — More than 50,000 Iowa student loan borrowers have enrolled in a new income-driven repayment plan rolled out by President Joe Biden’s administration this year, the White House has announced.

The Saving on a Valuable Education (SAVE) Plan was announced by Biden after the U.S. Supreme Court struck down his administration’s efforts to forgive up to $20,000 in student loan debt for low- and medium-income borrowers.

In Iowa, 54,600 borrowers are enrolled in the SAVE plan, White House figures show.

The plan is intended to lower payments for borrowers and make a college education more attainable for future students, U.S. Department of Education officials told reporters Wednesday.

“This plan is a game changer for millions of Americans,” White House domestic policy adviser Neera Tanden said. “Too many have put off having children, buying their first home, starting a business, just because of the incredible debt they’re under.”

The income-driven plan, which also considers the size of the borrower’s family, caps a borrower’s payment based on their income.

Starting July 2024, payments will be capped at 5 percent of a borrower’s income if they’re below 225 percent of the federal poverty line.

A single person making $40,000 a year would pay $60 a month. A single person making less than $32,800 a year would pay zero. A family of three with an income of $60,000 would pay $34 a month and zero if they earn less than that, according to the Department of Education.

One example provided by the department shows a single person making $38,000 a year and owing $25,000 in a Direct Subsidized Loan (DSL) student loan. That person now pays $134 a month. The new monthly payment would be $43.

Under the SAVE plan, if a borrower’s monthly payment is lower than the interest that accrues each month, the remaining interest is waived. The plan also makes it easier for borrowers to get their loans forgiven if they make payments on time over a set number of years.

The White House data broke down the number of borrowers enrolled in the plan by congressional district. In Iowa, those numbers are:

•District 1 (southeast Iowa, including Johnson, Jones, Cedar and Iowa counties: 13,400.

•District 2 (northeast Iowa, including Linn, Benton and Tama counties): 13,100.

•District 3 (south-central Iowa, including Polk County): 13,800

•District 4: (most of western Iowa): 10,600

•Unknown: 3,700

In total, Iowa has around 433,000 student loan borrowers who have an average of $30,800 in debt, according to the Education Data Initiative.

The White House said 5.5 million borrowers nationally are enrolled in the repayment plan. Of those, 2.9 million have no monthly payment because of their income level.

The SAVE plan replaced the previous Revised Pay As You Earn (REPAYE) plan. Nationally, about 3 million borrowers converted from the REPAYE plan to the SAVE plan, while more than 2 million are new enrollees, an administration official said.

The Congressional Budget Office estimated the plan would cost around $230 billion over the next 10 years because of the increasing number of loans being forgiven. An analysis by the Penn Wharton School pegged the price at $475 billion.

Republicans opposed

Congressional Republicans have been critical of the plan, arguing it will be costly and transfer student loan debt to taxpayers who did not take out loans.

Iowa U.S. Reps. Ashley Hinson and Mariannette Miller-Meeks, along with Sens. Joni Ernst and Chuck Grassley, have all co-sponsored legislation to block the plan.

The Republican-led House Education Committee advanced a bill that would block the plan in September. Biden is likely to veto any legislation that challenges the repayment plan if it reaches his desk.

"There is no such thing as canceling student loan debt," Hinson said in a written statement. "Why should a lineman with $0 in student debt be forced to pay for someone else’s gender studies degree? Hardworking taxpayers who never went to college or already paid off their loans shouldn’t be on the hook for others’ debt."

Grassley has introduced legislation intended to lower the cost of college education and make the cost more transparent to prospective students. He introduced the Understanding the True Cost of College Act, co-sponsored by Ernst.

In a written statement, Grassley said the SAVE program would be costly and saddle Iowans with other people's loan debt.

“Nothing in this program reduces the actual cost of college," he said. "In fact, it encourages even higher education expenses. We need to make education more affordable for students in a way that also helps restore fiscal sanity.”

In a statement, Ernst said Biden's student loan forgiveness efforts would increase inflation and the national debt, while contributing to the higher cost of education.

She also said she has sponsored legislation to expand eligibility for students to receive Pell Grants for short-term job training programs.

“Any Iowa student who chooses to pursue higher education, regardless of their background, should be able to do so. That’s why I’ve long supported Pell Grants for students in need, and have encouraged Iowans to pursue military service, like I did through the ROTC, to help cover the costs of their education," Ernst said.

Comments: cmccullough@qctimes.com