President Barack Obama, surrounded by college students at a White House event, signed an executive order on Monday making it easier for up to 5 million people to pay off their college tuition debt.
In an existing repayment plan that Obama announced in 2010, borrowers pay no more than 10 percent of their monthly income in payments, but it was only available to those who started borrowing after October 2007. Obama’s new order expands that program by opening it to those who borrowed at any time in the past.
“I’m only here because this country gave me a chance through education,” Obama said. “We are here today because we believe that in America, no hardworking young person should be priced out of a higher education.”
Obama also announced that he will have the government renegotiate its contracts with federal student loan providers to make it easier for students to avoid defaulting on their loans. Under Obama’s plan, the departments of the Treasury and Education will work with H&R Block, the makers of TurboTax, and other tax preparers to increase awareness on the part of borrowers about tuition tax credits and flexible repayment options.
Obama also added his support to more sweeping Senate legislation targeting the issue. The announcement is tied to a bill on the Senate floor this week sponsored by Massachusetts Sen. Elizabeth Warren, which, if passed, would allow an estimated 25 million Americans to refinance both federal and private student loans at lower interest rates.
The 5 million new people won’t be able to take advantage of Obama’s executive order right away, because it won’t kick in until December 2015. That’s because the Department of Education needs time to put the regulations into effect, which means borrowers will continue to pay thousands of dollars in payments for more than a year.
Last year, student loan debt topped more than $1 trillion, and that amount is expected to increase as college tuition rises.
Many education activists say Obama continues to fail to address key issues of student loan debt, such as capping or lowering tuition costs that continue to skyrocket.
“This is nothing substantially new from a similar announcement [Obama] made in October 2011,” said Alan Collinge, founder of StudentLoanJustice.org, a grassroots citizens organization dedicated to returning standard consumer protections to student loans. “This does nothing to address the systemically predatory underpinnings of the lending system, nothing to compel the colleges to lower their prices, nothing to decrease the amount of debt being forced upon the students.”
In 2011, at the height of the Occupy Wall Street movement, in which student loans were a major issue, Obama outlined similar proposals.
Collinge said that while he respects Obama on many issues, “he is really sort of phoning it in” on the student loan crisis. He added that, because of the complexity of signing up for reduced payments, “only a small percentage of borrowers actually see their balances written off, ultimately.”
Bob Hildreth, founder and executive director of FUEL Education, which works with low-income families to help them save for college, find scholarships and grants, and navigate sending their children to college, echoed Collinge.
“The president’s actions are well intended, but an executive order will do little to address the real problem,” Hildreth said. “The only way to really help students pay for college is by lowering tuition, and this is done by not having the government make good on every bad loan from which universities are profiting.”
In turn, the refinancing would cost the government about $58 billion in lost interest over 10 years, according to the Congressional Budget Office, but the legislation would raise $72 billion by imposing a new income tax on some high-income individuals.
There’s the rub. Republicans don’t want a new tax on wealthy Americans and will likely oppose Warren’s measure. If it should pass the Senate, the House, controlled by Republicans, would most likely kill the bill.
“This week, [Republicans] have the chance to help millions of young Americans. I hope they do,” Obama said.
For all the naysayers, Obama is continuing his mission to discuss student loans, which is becoming a hot issue in the midterm elections. On Tuesday, he will participate in a student loan Q&A on Tumblr, his first on the social media site.
“I ran for this office to help more young people go to college, graduate, and pay off their debt,” he said. “And we’ve made some really good progress, despite the best efforts of some in Congress to block that progress. Think about how much more we could do if they were not standing in the way.”
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