Loan Changes, Sans Congress

WASHINGTON — President Obama today will announce a plan to consolidate federal student loans for millions of borrowers and expand income-based repayment for current students — both steps he will take without input from or action by Congress, amid rising concern about student debt.

Together, the two changes — part of the president’s package of economic measures designed to be enacted by executive order — will affect about 7 million of the federal student loan program’s 36 million borrowers. Even before the changes were announced Tuesday afternoon, Congressional Republicans were already questioning whether the administration had the authority to make them.

The majority of borrowers affected will be students who borrowed money under both the Federal Family Education Loan Program, when banks issued federal student loans and collected government subsidies, and the Direct Loan Program, under which the federal government lends money directly to students.

The government began originating all loans through direct lending in 2010, when a provision to eliminate bank-based student lending was included in the administration’s health care overhaul. But many students who were enrolled at the time of the change have loans in both programs, meaning they make two payments. The Education Department has said these 5.8 million borrowers are more likely to default, though why is a matter of some dispute. Administration officials attribute it to the fact that borrowers must make payments to two or more entities, while others say the Education Department has failed to fully replace the support for borrowers and colleges that lenders and guarantee agencies had under FFEL.

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INSIDE HIGHER EDUCATION

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