President Barack Obama has signed an executive order that will allow millions of previously ineligible student debtors to qualify for the “Pay as You Earn” repayment program, which caps payments on student debt at 10 percent of monthly income and forgives outstanding balances after 20 years of repayments.
Obama’s order could open the benefit to as many as five million borrowers. Previously, in order to be eligible, borrowers could not have taken out loans before October of 2007, and could not have stopped borrowing before October of 2011. Earlier reports said the option will not become available to existing borrowers until December 2015.
Obama also said he will renegotiate contracts with Sallie Mae and other student debt servicers. Last month, Sallie Mae agreed to pay nearly $100 million for allegedly keeping American military service members from receiving lower interest rates while on active duty, prompting some to call for the government to cancel its contract.
And he said the government will work to better educate student borrowers about their repayment options.
Obama said the executive order was about as far as he could go on the issue and turned his attention to a Senate bill that is expected to see a vote this week. That bill would allow existing borrowers to refinance their debt at today’s lower interest rates. The bill, which would include new taxes on the wealthy, might pass the Senate, but would likely face a very uphill battle in the Republican-controlled House.
“I don’t know why folks aren’t more outraged by this,” Obama said of the presumed headwinds the bill will face, breaking from his prepared remarks during his press conference.
Obama stressed that those who earn a bachelor’s degree make more money and are less likely to be unemployed than those who hold just a high school diploma.
But the president acknowledged that the way toward diffusing student loan issues going forward also involves looking at the costs of education. Obama said that “as long as college costs keep soaring, we can’t just keep throwing money at the problem.”