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The Education Department announced Monday night that it had proposed rules to “create the most affordable income-driven repayment plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers’ progress toward forgiveness.”

The regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400. The regulations would also cut in half monthly payments on undergraduate loans for borrowers who do not otherwise have a $0 payment in this plan. The proposed regulations would also ensure that borrowers stop seeing their balances grow due to the accumulation of unpaid interest after making their monthly payments.

Under the regulations, the department said,  future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40 percent, a typical graduate of a four-year public university would save nearly $2,000 a year relative to the current REPAYE plan and 85 percent of community college borrowers would be debt-free within 10 years.  On average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half. 

The department also announced that it is working on a proposed gainful-employment regulation that would cut off federal financial aid to career training programs that fail to provide sufficient financial value and require warnings for borrowers who attend any program that leaves graduates with excessive debt. The same regulatory package will also include proposals to strengthen the conditions that can be placed on institutions that fail to meet the requirements of the Higher Education Act or exhibit signs of risk.

An Inside Higher Ed article tomorrow will have more details and reaction to the plan.