President Barack Obama pledged to help borrowers cope with student loan debt by capping student loan repayments at 10 percent of a borrower’s discretionary income, starting next year.
In addition, starting in January, the administration plans to offer 6 million borrowers the chance to consolidate their loans and reduce their interest rates. The effect of the executive actions could potentially save borrowers hundreds of dollars a month, according to the Department of Education.
In a speech at the University of Colorado in Denver, Obama laid out his plan. “Over the past three decades, the cost of college has nearly tripled,” he said. “And that is forcing you, forcing students, to take out more loans and rack up more debt. Last year, graduates who took out loans left college owing an average of $24,000. Student loan debt has now surpassed credit card debt, for the first time ever.”
Obama noted that he and his wife Michelle were also saddled with high debts after graduation. “By the time we both graduated from law school, we had, between us, about $120,000 worth of debt,” he said. “We combined and got poorer together. So we combined our liabilities, not our assets. We were paying more for our student loans than we paid on our mortgage each month.”
Obama’s proposal to cut student loan debt came on the heels of an administration plan that he announced Monday to help mortgage borrowers cope with underwater mortgages by refinancing the loans at lower interest rates. Like the student loan initiative, it would be accomplished by executive action, bypassing Congress.
The administration would also provide immediate help to student loan borrowers by helping more borrowers to be eligible for a current income-based repayment plan that caps payments at 15 percent of a borrower’s discretionary income. For more information about the program, visit www.studentaid.ed.gov/ibr.
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