President Obama, telling supporters in the East Room of the White House that “I am only here today because this country gave me a chance through education,” signed an executive order today capping student loan repayments at 10 percent of the borrower’s monthly income.
His order, which needs no congressional approval, will close loopholes in a 2010 law that restrained borrowers’ repayments, but not on loans borrowed between October 2007 and October 2011. While it will not go into effect until December 2015, this executive order will bring at least some financial relief to an additional 5 million borrowers burdened with student loan debt.
President Obama also formally endorsed the Student Emergency Loan Refinancing Act introduced by Sen. Elizabeth Warren (D-Mass.), which would allow borrowers to refinance their student loans to a lower, fixed interest rate. The bill is expected to come to a vote in the Senate on Wednesday.
The Campaign for America’s Future and the organization Our Time has launched a petition calling on the Senate to pass Warren’s bill. On Tuesday, these organizations will join others in presenting hundreds of thousands of combined petition signatures to the Senate. Sign your name to this petition to be counted among those calling for passage of this bill.
Unfortunately, even with the enthusiastic backing of the president, it is struggling to find support past its 39 Democratic co-sponsors. The bill’s inclusion of the “Buffett rule,” which would close tax loopholes for the richest Americans, makes it unpopular with some. But, President Obama maintains that it would be “scandalous” to continue to allow tax loopholes while students struggle under the weight of loan debt.
President Obama’s announcement comes as the debate over student loan reform continues to escalate. Later this summer, the Department of Education will renegotiate contracts with student loan servicers and providers, like Sallie Mae and JP Morgan Chase. Last week, the Senate held hearings exposing some of these companies’ shameful practices, including making seemingly random changes in loan terms and withholding personal account information from borrowers. Currently, very few regulations exist to keep these companies in check. But the Obama administration hopes that contract renewal negotiations will give loan providers and servicers incentives to supply honest and thorough information to their clients. With more than 40 million Americans already encumbered with student loan debt, these reforms are crucial.
While the administration has indicated that it will focus on student loan reform, any modifications to loan policy will face staunch opposition from congressional Republicans. Just last weekend, Sen. Lamar Alexander (R-Tenn.) called Democrats’ recent efforts at student loan reform “a political stunt.” However, President Obama offered reassurance at the prospect of a potentially long battle for student loan fairness, saying, “None of these fights have been easy, but all of them have been worth it.”
Echoing what most Americans are currently thinking, President Obama reiterated that “a generation of Americans cannot afford to wait for Congress.” So, he is taking action himself. Hopefully, Congress will follow his lead.