Obama Signs an Executive Order Extending Student Loan Debt Cap
Yesterday, President Barack Obama sat down with Tumblr founder David Karp to do a live Q&A on the service, answering questions about student loans and his recent executive order expanding the Pay-as-You-Earn program.
(Photo Credit: jurvetson/Flickr)
The President’s chat combined explanation of recent and pending legislation, discussion about gun control, and common sense career advice.
“I think your career isn’t going to be a straight line all the time,” he told his Tumblr audience. “I think there may be times where you have to take a detour and do something practical to pay the bills. There are going to be times where you see an opportunity and you’re making a calculated risk that I’m going to start some wacky company called Tumblr.”
(President Obama and Tumblr Founder David Karp, via The Whitehouse)
Earlier this week, the President signed an executive order making changes to regulations covering student loan debt, including the Pay-as-You-Earn program.
The PAYE caps repayment of federal direct student loans at 10 percent of the borrower’s income, and forgives loans after 20 years for privately employed workers and 10 years for those with public service jobs. Previously, loan holders who borrowed before October 2007 or stopped repaying their loan prior to October 2011 were ineligible for the program. This expansion would extend PAYE to 5 million borrowers who were previously ineligible.
Other highlights of the President’s memorandum:
- The Department of Education will renegotiate its contracts with private loan providers, incentivizing companies that find ways to help borrowers meet their obligations, such as offering lower payments to delinquent borrowers or those in default.
- The DOE will direct its loan providers to compare borrowers against databases of military personnel who are eligible for a 6 percent interest rate cap under The Servicemember Civil Relief Act.
- The Secretary of the Treasury and the Secretary of Education will work with H&R Block and Intuit to spread awareness of repayment options. These two firms are the biggest tax preparers in the country, and so have an opportunity to reach a large percentage of loan holders during the tax filing process.
The President’s executive order comes on the heels of Senator Elizabeth Warren’s bill proposing to allow loan holders to refinance their debt at lower interest rates. The bill is expected to pass the Senate, but faces opposition in the House.
“I don’t know why folks aren’t more outraged about this,” Obama said during a press conference, noting that workers with bachelor’s degrees earn more money and are less likely to be unemployed than those without.
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