President to Offer Student Debt Relief
The White House today announced new student loan guidelines to help millions deal with an ever-growing stack of education debt.
President will address the problem in two ways.
First, he will accelerate a measure passed by Congress that reduces the maximum repayment on student loans from 15 percent of discretionary income annually to 10 percent. The White House wants it to go into effect in 2012, instead of 2014. In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. About 1.6 million borrowers could be affected.
Second, he will allow borrowers who have loans from both the Family Education Loan Program and a direct loan from the government to consolidate them into one loan. The consolidated loan would be up to a half percentage point less. This could affect 5.8 million more borrowers.
Education Secretary Arne Duncan told reporters on a conference call that the changes could save some borrowers hundreds of dollars a month.
“These are real savings that will help these graduates get started in their careers and help them make ends meet,” Duncan said.
Obama is expected to unveil his plan at a stop in Denver. The White House said the changes will carry no additional costs to taxpayers.
At nearly $1 trillion, federal and private student loans now exceed US credit-card debt, posing a formidable repayment burden for many borrowers at a time of near-double digit unemployment.
Thus the burden of some $1 trillion in outstanding student loans – up from $500 billion just five years ago – is a hot issue in the Occupy Wall Street protests. Students struggling with loans they can’t afford to repay blame the federal government for stripping away consumer protections.
President Obama said in a statement on Tuesday: “Steps like these won’t take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference.”
The President will use an executive order to bypass a gridlocked Congress and implement the measure as part of his recent focus on jobs and debt.