S.Amdt. 4723

The amendment submitted by Mr. Merkley, titled the Savings Opportunity and Affordable Repayment Act, aims to overhaul specific student loan repayment rules within the Higher Education Act of 1965 and remove certain subsections of the OBBBA.

The primary purpose of this amendment is to establish and implement a new income-contingent repayment option called the Savings Opportunity and Affordable Repayment plan.

Key Changes and Additions

• New Repayment Plan: It creates the Savings Opportunity and Affordable Repayment plan, which sets monthly payments based on the borrower's adjusted gross income and family size relative to the poverty line.
• Payment Calculations:
  • Payments are $0 for income less than or equal to 250 percent of the poverty line.
  • For income above that level, payments are calculated at 5 percent for undergraduate loans and 10 percent for other eligible loans, prorated by the loan balance.
  • A minimal payment floor is set: payments less than $5 become $0, and payments between $5 and $10 become $10.
• Loan Cancellation: It provides for the cancellation of remaining balances after 120 monthly payments (10 years) for those with only undergraduate loans, or 180 monthly payments (15 years) for those with other eligible loans.
• Interest and Principal: 50 percent of monthly payments go toward the principal, and 50 percent go toward charges, costs, and interest. The Secretary is prohibited from charging accrued interest not covered by the monthly payment.
• Plan Phase-outs: It establishes a two-year phase-out period for the Pay As You Earn (PAYE) and Income Contingent Repayment (ICR) plans, including prohibitions against re-enrolling in these plans after a borrower has switched to a different one.
• Administrative Updates: It defines "partial financial hardship" and updates eligibility and verification procedures for income-based repayment.