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Student Loan Repayment Plans and Free College

On Oct. 1, 2023, for the first time since 2020, federal student loan repayments resumed. This article summarizes the Biden administration's current student loan repayment plans and addresses a second option some states have adopted: subsidized college tuition.


As of 2023, the average federal student loan debt is $37,338, and there are over 40 million Americans in federal student loan debt. In response to the COVID-19 pandemic, federal student loan payments were suspended for an initial six months, intended to resume in September 2020. Three years later, federal student loans resumed accruing interest (on Sep. 1 of this year, 2023), and payments just resumed this month, on Oct. 1. 


President Biden has been pushing for student loan programs since 2022, the most recent being the SAVE repayment program. SAVE stands for Saving on a Valuable Education and is an income-based repayment program. The SAVE program will begin in July 2024. The goal is to cut monthly student loan payments for borrowers, reducing payments to five percent of monthly disposable income. 


The Biden administration has also pushed repeatedly for student loan forgiveness plans, but the United States Supreme Court has repeatedly blocked those plans before implementation, citing the 2003 HEROES Act. The most recent student loan forgiveness plan, the Higher Education Act, would give the education security authority the right to waive student loans. The Biden administration’s goal in this act is to cancel up to $20,000 of student loans for individuals making up to $125,000, or up to $250,000 for couples. 


Another option to pay for college, implemented on a state level, is subsidized tuition. There are currently 22 state-subsidized college programs in the United States, with the most inclusive program coming out of New Mexico. Known as the Opportunity Scholarship, this program covers tuition for all New Mexico residents pursuing their first Associate’s or Bachelor’s degree at any publicly funded institution. Unlike New York or Washington’s need-based subsidized college programs, New Mexico’s Opportunity Scholarship does not have a maximum family income for eligibility. This means that students who do not qualify for Pell Grants or other financial aid can still afford a college education without having to take out loans.


The three aforementioned states, along with Colorado, Indiana, Louisiana, Massachusetts, Minnesota and Oklahoma, are the only other states with subsidized college programs designed to pay for a Bachelor’s degree.


The majority of these programs and scholarships are last-dollar programs, intended to cover the remainder of tuition costs after federal financial aid and other scholarships and to prevent students from taking out tens of thousands of dollars in debt to pursue an education. The New Mexico Opportunity Scholarship, however, is the only first-dollar program for a Bachelor’s degree, meaning other financial aid and scholarships can be applied to housing and other fees.


Those additional fees can be the deciding factor for students attending college, especially for four-year programs. For students in rural areas, commuting to classes might not be an option, so programs that allow students to use scholarships for on-campus housing open up an opportunity to attend college that they might not have with a last-dollar program.

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