Obama Expands IBR, Pushes Refinancing
Career College Central summary:
Amid growing concern that outstanding student debt is hurting the economy, President Obama on Monday directed his administration to make an additional 5 million existing student loan borrowers eligible for the federal government’s most generous income-based repayment program.
“We’re still seeing too big a debt load on too many young people,” Obama said, adding that “the outrage here is that they’re just doing what they’ve been told they’re supposed to do. I can’t tell you how many letters I get from people who say, 'I did everything I was supposed to and now I’m finding myself in a situation where I’ve got debts I can’t pay off.' ”
The executive action will allow all federal loan borrowers, regardless of when they borrowed, to cap their monthly loan payments at 10 percent of their discretionary income and to have any remaining loan debt forgiven after 20 years. That benefit is currently available only to certain borrowers — those who first took out a loan after September 30, 2007 and continued borrowing after September 30, 2011 — and it was already set to become an option for all new borrowers starting July 1.
Obama also directed the U.S. Department of Education to better publicize the income-based repayment programs through targeted outreach and to study ways to more effectively counsel borrowers. He also said the government would renegotiate its contracts with loan servicing companies to prod them to do more to help struggling borrowers.
The planned expansion of income-based repayment to existing borrowers drew immediate criticism from Congressional Republicans, who questioned the cost to taxpayers and the administration’s legal authority to make the change on its own, without legislation passed by Congress.
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