President Obama today moved to close a “loophole” in regulations aimed at easing the burden of repaying federal student loans.
Obama signed a presidential memorandum ordering the Education Department to extend monthly repayment “caps” to nearly 5 million student borrowers by December 2015.
“At a time when higher education’s never been more important, it’s also never been more expensive,” Obama said at an event in the White House east room. “Over the last three decades, the average tuition at a public university has more than tripled, at the same time that the typical family’s income has gone up just 16 percent.”
“We are here today because we believe that in America no hardworking young person should be priced out of a higher education,” he said.
Today, 71 percent of those earning a bachelor’s degree graduate with debt, which averages $29,400, according to the White House. Total student debt in the U.S. topped $1 trillion last year.
The executive action today means some students with outstanding loans initiated before October 2007, and who meet income requirements, could be allowed to cap their payments at 10 percent of their income.
The existing federal repayment cap program applies only to borrowers who took out loans after October 2007 and continued borrowing through October 2011 For some students, any outstanding balance is completely forgiven after 20 years.
The White House could not say how much the new measure will cost taxpayers.
Not everyone applauded today’s announcement.
House Speaker John Boehner, R-Ohio, said it does not address root causes of the problem. ”Today’s much-hyped loophole closure does nothing to reduce the cost of pursuing a higher education, or improve access to federal student loans – nor will it help millions of recent graduates struggling to find jobs in the Obama economy,” Boehner said in a statement.
Separately, Senate Democrats are pushing legislation that would allow 25 million Americans with federal student loans to refinance at lower rates. But the legislation faces stiff opposition from Republicans who oppose financing the measure with a minimum tax on millionaires, aka The Buffett Rule.
“It would be scandalous if we allowed those kinds of tax loopholes for the very, very fortunate to survive while students are having trouble just getting started in their lives,” Obama said. “This week, Congress will vote on that bill. And I want Americans to pay attention to see where their lawmakers’ priorities lie here. Lower tax bills for millionaires or lower student loan bills for the middle class. This should be a no-brainer.”
A Republican National Committee spokesman said Obama is “playing politics” ahead of the November elections and drawing attention away from high unemployment among recent college graduates.