In breaking student loan news, this afternoon President Obama signed an executive order designed to provide repayment relief to struggling student loan borrowers. Obama’s plan attempts to relieve student debt pressures and decrease defaults in three primary ways:
- Helps existing borrowers lower monthly payments by expanding the Pay As You Earn (PAYE) student loan repayment plan to all Federal Direct Loan borrowers. Previously restricted to “new” student loan borrowers, defined as those without any federal loan debt as of October 1, 2007 and with at least one loan borrowed since October 1, 2011, PAYE will become available to all Federal Direct Loan borrowers by 2015, an expansion to about 5 million additional graduates. PAYE repayment caps monthly minimum payments at 10 percent of a borrower’s discretionary income. Get more details on the PAYE repayment plan.
- Requires the Department of Education to renegotiate contracts with federal student loan servicers such as Sallie Mae. The renegotiated contracts will provide financial incentives to servicers to provide better customer service and help borrowers avoid default.
- Provides expanded access to student loan repayment and tax incentive information through private sector businesses, professional associations, community groups, tax preparers, and social media. In this spirit, President Obama will host a Q&A on education, college access, and reducing student loan debt on Tumblr tomorrow. Questions can be submitted here.
Though not part of the executive order, President Obama also took the opportunity to throw his support behind Senator Elizabeth Warren’s student loan refinance proposal, which would allow graduates with high interest rate student loans to refinance their education debt at today’s lower rates. The bill is expected to be voted upon by Congress within the week. Read more about Warren’s refinance proposal.
Leave a comment below to let us know what you think about Obama’s new plan to ease the student loan debt burden.