tuesday, 10 june of 2014

U.S. - Obama, noting own student debt burden, expands repayment cap and pushes bill


Obama, noting own student debt burden, expands repayment cap and pushes bill

President Obama signed an executive order on Monday intended to lessen the college loan burden on nearly five million younger Americans by capping repayments at 10 percent of the borrowers’ monthly income.

Joined by indebted graduates in the East Room of the White House, Mr. Obama said the spiraling cost of higher education had put “too big a debt load on too many people.”

“These rising costs have left middle-class families feeling trapped,” he said. “You’ve got middle-class families who can’t build up enough savings, don’t qualify for support, feel like nobody’s looking out for them.”

Mr. Obama drew on his own financial history in promoting the measure. He told the audience that he and his wife, Michelle, paid off their law school loans just 10 years ago, after they had already begun saving for their daughters’ college educations.

“This is why I feel so strongly about this,” the president said. “This is why I’m passionate about it.”

Mr. Obama’s executive actions coincided with the introduction of a bill by Senate Democrats that would allow 25 million borrowers to refinancestudent loans at lower interest rates. The government would finance the measure by imposing a new tax on wealthy people.


The president challenged Congress to pass the legislation, which would go further than his executive orders and which, he said, “pays for itself.” But with Republicans implacably opposed, Democrats appear unlikely to gather the votes in the Senate needed to pass it.

“Everybody here knows it’s a partisan political stunt,” Senator Lamar Alexander of Tennessee, the ranking Republican on the education committee, said in an interview. The bill, he said, would expand the federal debt and raise taxes while offering loan-holders a subsidy of $1 a day.

Under the order, the administration will expand a 2010 law that capped monthly repayments, applying it to those who got loans before October 2007 or stopped borrowing by October 2011. The order will not go into effect until December 2015 to allow the Education Department to draft and institute new rules.

In addition to the cap, Mr. Obama said, the government will renegotiate contracts with Sallie Mae and other loan providers to increase incentives for paying off loans. The Education Department will also work with tax preparation firms like H & R Block and Intuit to inform borrowers of repayment options and tax credits for college tuition.

The White House said it did not know how much the measures would cost. Briefing reporters before the president spoke, the education secretary, Arne Duncan, said, “We’ll figure that out the back end, but we think this is something that’d be fantastic for the economy.”

“This is not about pointing fingers and laying blame,” he said. “This is about mutual responsibility.”

But Mr. Obama took a gleefully political tone, setting aside his prepared text to criticize Republicans for refusing to consider a tax increase for millionaires to finance a program that would ease the debt burden on graduates.

“It would be scandalous if we allowed these kinds of tax loopholes for the very, very fortunate to survive while students are having trouble just getting started with their lives,” he said.

After the announcement, Mr. Obama joined his chief of staff, Denis R. McDonough, for an impromptu walk to a Starbucks near the White House. It was the latest in a series of spontaneous outings for a president who appears to be suffering from cabin fever. Emerging from the White House, he said with a smile, “The bear is loose.”

(Published by The New York Times – June 9, 2014)

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