NICK GOSNELL
Hutch Post
HUTCHINSON, Kan. — President Biden's student loan forgiveness proposal will have a minimal impact on students that attended Hutchinson Community College, as the school's default rate is only 2%, according to President Carter File.
"We do a great job of trying to mitigate our default rate by using services to contact students when we know they go into default," File said. "Our student loan default rate is on the very low side of most community colleges."
The proposal would forgive up to $10,000 in debt for those making $125,000 or less per year and up to $20,000 for Pell Grant recipients, who traditionally come from low-income households. Nonetheless, it shouldn't have much impact competitively, either, at least in the short term.
"If a student, a freshman, started two weeks ago, they'll still accumulate debt," File said. "I think it will depend upon how that's handled in the future."
The Biden-Harris Administration is proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers.
The rule would:
Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
Cover the borrower's unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower's loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.
File had not had a chance to read through the proposal fully yet when speaking to Hutch Post Wednesday morning.