President Obama announced today new executive actions to lift the burden of student loan debt, including an expansion of the criteria for an alternative student loan repayment program.
He signed a new Presidential Memorandum directing the Secretary of Education to propose regulations that would allow nearly 5 million additional federal direct student loan borrowers the opportunity to cap their student loan payments at 10 percent of their income.
"I'm only here because this country gave me a chance through education," Obama said, according to the Associated Press. "We are here today because we believe that in America, no hard-working young person should be priced out of a higher education."
The Presidential Memorandum also outlines a series of new executive actions aimed to support federal student loan borrowers, especially for vulnerable borrowers who may be at greater risk of defaulting on their loans.
The alternative payment programs are designed to help borrowers struggling under the weight of student loans. They include forgiveness programs for on-time payments and public-sector employees. Teachers can have their balance canceled after ten years, for example.
Low-income borrowers can have their balance canceled after 20 or 25 years of on-time payments.
Many student loan borrowers are working and trying to responsibly make their monthly payments, but still struggle with debt.
According to a White House press release, a 2009 graduate earning about $39,000 a year as a fourth-year teacher, with student loan debt of $26,500, would have his or her initial monthly payments reduced by $126 under the President’s Pay As You Earn plan compared with monthly payments under the standard repayment plan and would see a reduction in annual loan payments of more than $1,500.
The Department will begin the process to amend its regulations this fall with a goal of making the new plan available to borrowers by December 2015. The plan, which will cap student loan payments at 10 percent, may also increase the total amount paid over time, as interest on a loan would be paid for a longer period.
The president also voiced his support for and urged Congress to pass legislation that could help an estimated 25 million Americans refinance outstanding student loans at lower interest rates, the same as those available to federal student loan borrowers taking out loans this year. This move could save a typical student $2,000 over the life of his or her loans.
On Tuesday, President Obama is scheduled for a live Q&A with Tumblr founder and CEO David Karp, and will answer questions directly from consumers across the country as well as discuss student loan debt and other education topics.
Tumblr is currently soliciting questions for this live chat.
Obama’s answers will be streamed live on the White House Tumblr account.
Over the past three decades, the average tuition at a public four-year college has more than tripled, while a typical family's income has barely budged. More students than ever are relying on loans to pay for college. Today, 71 percent of those earning a bachelor’s degree graduate with debt, which averages $29,400. While most students are able to repay their loans, many feel burdened by debt, especially as they seek to start a family, buy a home, launch a business, or save for retirement.
Information from CNN and the Associated Press was used in this report.