Obama takes action to increase assistance to student borrowers

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Explore:  Student Loans Students

President Obama issued a Presidential Memorandum last Monday directing the Secretary of Education to issue regulations that allow additional students to take advantage of a program to cap their student loan payments at 10 percent of their income and to improve communication about that option and existing student loan repayment options. According to the White House, the order will allow for more than 5 million federal direct student borrowers to cap their student loan payments.

Sections of the Memorandum outline specific plans to increase borrower awareness and enrollment in income based repayment plans including a direction to the Secretary of Education to partner with private-sector entities to educate borrowers during the 2015 tax filing season. However, while debt levels are at an all-time high, enrollment in income based repayment plans, like the one that will be expanded by the Memorandum, remains low, with reportedly only 11 percent of borrowers enrolled despite a similar marketing campaign through Intuit and Turbo Tax during the 2014 tax season.

In remarks at the signing, Obama urged Congress to take action and specifically mentioned a bill championed by Sen. Elizabeth Warren that would allow students to refinance their loans at a lower interest rate. That bill is not without its critics, though, and late last week it stalled in the Senate, as it fell short of the necessary votes needed to invoke cloture.

Monday’s Executive Order clearly signals the Obama administration’s efforts to court student borrowers, but it remains unclear whether the program will gain any more success than previous efforts to publicize the administration’s loan relief programs. Payment reductions are still a long way away as well, as the Memorandum directs the Department of Education to issue proposed rules by June 9, 2015 with final rules to be effective by December 31, 2015.

Topics:  Student Loans, Students

Published In: Consumer Protection Updates, Education Updates, Elections & Politics Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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