President Obama announces steps to help students afford loan payments
Growing increasingly impatient with a Congress frozen by partisan paralysis, President Barack Obama ordered his administration June 7 to make it easier for more than a million students with federal student loans to cap their monthly payments at 10 percent of their discretionary income starting this year.
President Obama’s effort to provide relief to students comes as Congress continues to kick down the road legislation that would prevent the federal student loan interest rate from doubling July 1. If Congress doesn’t act, more than 7 million students will see their interest rates go to 6.8 percent, saddling the average student with an additional $1,000 in debt.
“How many people can afford to pay an extra $1,000 if you’re a student just because Congress can’t get its act together?” said President Obama in remarks delivered at the University of Nevada at Las Vegas.
Capping loan payments “is a big deal,” said the president, “because no matter what career you choose — if you decide you’re going to be a teacher or you’re going to be a social worker or you’re going to go into public service or the nonprofit sector — you’ll still be able to stay current on your loans.”
I want to make it easier for more students like you to earn a degree without shouldering a mountain of debt because even though a college education is still a great investment, the burden of debt is serious and it’s hard on folks just as they’re starting off in life.
The average student graduates with $26,000 in student loan debt, said President Obama.
The president directed the departments of education and the treasury to streamline the “Income Based Repayment” process and improve information available to responsible borrowers.
President Obama enacted legislation in 2009 that lowered the cap on loan payments to 10 percent for borrowers beginning in 2014. In October, the president announced an executive action to make that lower cap available to more borrowers by the end of this year, which will reduce monthly student loan payments for more than 1.6 million responsible student borrowers.
Recently, Republican presidential candidate Mitt Romney followed President Obama’s lead by urging Congress to keep the rate at 3.4 percent. On the other hand, Romney supports the House Republican leadership’s budget proposal, which would cut Pell Grants by 25 percent or more.
President Obama has taken a number of other steps to make a college education more affordable. He:
- Revamped the student loan system, which was giving tens of billions of dollars to big banks to administer loans, and redirected the money to students.
- Set up a new consumer watchdog agency to give students and their parents access to a simple factsheet on student loans and financial aid.
- Extended Pell Grants to 3 million more students.
- Signed a tax credit worth up to $10,000 to help middle class families cover the cost of tuition.
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