As Congress Bickers, Obama Takes Executive Action On Student Loans
Careeer College Central summary:
On the eve of a Senate fight over student-loan refinancing, President Obama is taking executive action to ease students' debt burdens. At a White House event this week, Mr. Obama announced that he will expand a law that caps borrowers' loan payments at 10 percent of their income to individuals with older loans—those who borrowed before October 2007 or stopped borrowing by October 2011.
The president will also announce plans to renegotiate contracts with federal student-loan servicers to provide them with financial incentives to keep students out of default. The percentage of students defaulting on their loans within two years of graduating reached 10 percent last year, the highest rate in nearly two decades.
Matt Lehrich, a White House spokesman, estimated that an additional five million borrowers would qualify for lower payments under the president’s plan. It’s unlikely that many borrowers will enroll, however. While students' debt levels are at an all-time high, enrollment in income-based repayment plans has remained stubbornly low, at roughly 11 percent of borrowers. And the new relief won’t be immediate, either—struggling borrowers will have to wait until the end of 2015, to give the Education Department time to issue new regulations.
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