President Obama announced today new executive actions to lift the burden of student loan debt, including an expansion of the criteria for an alternative student loan repayment program.
He signed a new Presidential Memorandum directing the Secretary of Education to propose regulations that would allow nearly 5 million additional federal direct student loan borrowers the opportunity to cap their student loan payments at 10 percent of their income.
The president said Congress should also take steps to ease debt burdens on students, 71 percent of whom earn bachelor’s degrees with debt, which averages $29,400.
Senate Democrats have proposed legislation that would allow millions of Americans to refinance both federal and private undergraduate student loans at lower interest rates.
The bill is unlikely to overcome the opposition of Republicans, who say the measure would come at too high a cost for the government. Obama said Republicans were not doing enough to support students, arguing that it should be possible for graduates to get a lower interest rate in the same way homeowners are able to.
“If you’re a Big Oil company, they’ll go to bat for you,” he said. “If you’re a student, good luck.”
Democrats hope the issue will distinguish them from Republicans in the eyes of voters and help them retain control of the Senate in November elections, Guggenheim Partners analyst Chris Krueger said.
“This Democratic pivot to student loan forgiveness is entirely political and is not designed to become law but rather to be used as a wedge issue in the midterm elections,” Krueger wrote in a research note to clients.