President Obama is set to sign an executive order that will cap student loan repayments at 10% of their monthly income, starting in December 2015.
Although many students are currently covered by a similar cap, this new order will extend the protection to an extra 5 million students, including those who borrowed money before October 2007, and those who have not borrowed since October 2011.
The president has increasingly turned to executive orders to circumvent a Republican-controlled House which has made obfuscation and obstruction of his agenda their main goal, while offering little to no proposals of their own to deal with problems such as student debt.
A White House official told reporters:
“Many student loan borrowers are working and trying to responsibly make their monthly payments, but are nonetheless struggling with burdensome debt.”
Senator Elizabeth Warren (D-MA) has proposed a bill that would allow students to refinance their loan payments in the same way a person may renegotiate their mortgage of car payments. The estimated $60 billion shortfall in cash would be offset by introducing the Buffett Rule that would tax millionaires at a higher rate. This move by the president is an implicit endorsement of the spirit of Senator Warren’s proposal.
While the Senator’s bill is unlikely to pass the Republican-controlled House, President Obama’s order will help ease the pressure on millions of American students who are struggling with their loan payments, the defaulting of which can have very serious consequences, as the same White House official noted:
“The challenges of managing student loan debt can lead some borrowers to fall behind on their loan payments and in some cases even default on their debt obligation, with such consequences as a damaged credit rating, losing their tax refund, or garnished wages.”
Listen to President Obama talk about the student loan debt crisis in the video below, courtesy of CBS News.