New SOAR plan would cap student loan payments at 5–10%

What does this do?

This bill creates a new repayment option called the SOAR plan for federal student loan borrowers. Borrowers pay nothing on income up to 250% of the federal poverty level, then 5% on income above that for undergraduate loans and 10% for other loans. The government covers any interest a monthly payment does not fully pay, and half of every payment goes directly toward the loan's principal balance.

Who does it affect?

Any borrower with federal student loans could enroll in the SOAR plan. Borrowers currently in the Pay As You Earn (PAYE) or Income-Contingent Repayment (ICR) plans can generally stay in those plans, but new enrollees would no longer be able to join them two years after the bill becomes law.

Why does it matter?

Borrowers repaying only loans from short undergraduate programs of two years or less would have remaining balances canceled after 10 years of qualifying payments, and borrowers with other loans after 15 years. Two existing repayment plans would be phased out for new enrollees over time, which would reduce the repayment options available to future borrowers.

Where does it stand?