President Obama will announce Monday that he plans to expand an income-based repayment program for federal student loan borrowers, The New York Times reported.
The administration plans to broaden eligibility for its Pay As You Earn program – which caps student loan payments at 10 percent of borrowers’ discretionary income and forgives any unpaid debt after 20 years – to include an estimated 5 million additional borrowers who have older loans, according to the Times.
Obama will also formally announce that the Education Department plans to renegotiate the contract it has with federal student loan servicers to include incentives for helping borrowers avoid default. The department previously said it plans to change how it oversees those servicing companies and had said it was “re-examining” how it pays them. Monday’s executive actions come as Senate Democrats are making a push on student debt relief in advance of the fall midterm elections.
Over the weekend, Obama endorsed a bill by Senate Democrats that would allow existing borrowers to lower the interest rate on their student loans. The legislation proposes to fund such a refinancing program by enacting the so-called “Buffett Rule,” which would end some tax breaks for millionaires. Obama said that Congress had a choice to either “protect young people from crushing debt, or protect tax breaks for millionaires.”
Republicans are largely opposed to the proposal. In a statement on Sunday, Senator Lamar Alexander of Tennessee, the top Republican on the Senate education committee, rejected the plan as a “political stunt” to give former students money to pay off their loans. “College graduates don't need a $1-a-day taxpayer subsidy to help pay off a $27,000 loan,” he said. “They need a good job.”