The president will issue an executive order Monday in the name of easing student borrowers’ debt loads by capping repayments at 10 percent of their monthly income, the White House confirmed to POLITICO.
President Barack Obama said in his weekly address Saturday that he would take action on student loan issues in the coming days, but gave no details. The executive order, first reported by the New York Times, will expand on a 2010 law that capped borrowers’ repayment but left a hole in eligibility for people with older loans. Those left out of that relief include people who borrowed before October 2007 or stopped borrowing by October 2011.
“This makes it simpler to have one set of terms,” said Jason Delisle, director of the New America Foundation’s Federal Education Budget Project. But he pointed out that all borrowers already have the option of basing loan repayments on their income.
Federal student loan debt reached more than $1 trillion last year, an amount that has some economists concerned is creating a chilling effect on spending, home-buying and other economic drivers.
“This is commencement season, a time for graduates and their families to celebrate one of the greatest achievements of a young person’s life,” Obama said Saturday. “But for many graduates, it also means feeling trapped by a whole lot of student loan debt.”
The economic reasoning behind the maneuver is questionable, however, Delisle said. The president is making the case that “we need to help [student loan debtors] with debt so they can go into even more debt,” such as taking out a mortgage to buy a home. But student loans already helped these borrowers consume beyond their means, he said.
The executive order will be part of a White House event on student loans planned for Monday. The White House said the change will allow an additional 5 million borrowers with federal student loans to cap their monthly payments at just 10 percent of their income.
SOURCE: NIRVI SHAH