Student Advocates Hail Obama's Student Loan Order as a 'Positive Step'

Student advocates are calling a White House policy change aimed at easing the financial burden of student loans a first step toward addressing what they say is a growing student debt crisis.

President Barack Obama issued an executive order Monday that caps loan repayments at 10 percent of borrowers’ monthly income. The move is meant to expand on a 2010 law that capped repayments for people with newer loans but didn’t help people who took out student loans between 2007 and 2011. The White House says the order, set to take effect late next year, will bring relief to 5 million more borrowers.

Anne Johnson, executive director of Generation Progress, the youth arm of the liberal Center for American Progress, called the move a “really positive step,” and said it’s a sign that the White House is hearing the increasingly vocal calls for reform from students and their families.

“We’re very excited,” she said. “The expansion of the Pay As You Earn program is a really important step in helping borrowers manage student loan payments.”

The timing of the announcement coincides with graduation ceremonies around the country. While commencement season is a time for celebration, Obama said Monday at the White House that graduates can feel “trapped” by student debt.

“This is something we are deeply invested in,” the president said, “but as long as college costs keep soaring, we can’t just keep throwing money at the problem.”

In addition to capping repayments, the president directed the Education and Treasury Departments to renegotiate contracts with federal loan servicers to create incentives for the servicers to work with borrowers to find more flexible repayment plans. The Education Department will also reduce interest rates for military service members automatically, where they previously needed to complete additional paperwork.

As student debt has ballooned beyond $1 trillion, the rate of student borrowers defaulting on their loans has also risen to about 15 percent. Student advocacy organizations like Young Invincibles and Higher Ed, Not Debt have stepped up pressure on lawmakers to pass reforms to help student debtors.

Rory O’Sullivan, deputy director of Young Invincibles said his organization “commends the president” for issuing Monday’s order.

His organization would like to see more done to help students – strengthening rules around how for-profit colleges access aid, for instance – but O’Sullivan acknowledged that most changes require congressional action and given the limitations, the executive order is a “step in the right direction.”

Student groups have been particularly critical of for-profit colleges collecting a disproportionate amount of federal student aid and failing to graduate students. They’ve also criticized the Education Department for profiting from student loans.

“We need more actions like this,” O’Sullivan said of Monday’s executive order.

Lawmakers have begun to address student debt and college affordability, but there has been little agreement on a solution.

A White House-backed proposal by Sen. Elizabeth Warren (D-Mass.) to let people with older federal student loans refinance at the rate current borrowers pay is set to reach the Senate floor this week, but it is unlikely to pass. The bill would be funded by tax increases on the wealthiest Americans, an idea that won’t gain traction in the Republican-controlled House of Representatives.

Sen. Marco Rubio (R-Fla.) has previously promoted an income-based repayment plan that would ask students to pay a percentage of their salary toward student debt for a specified number of years, but Democratic backing has been hard to come by.

House Speaker John Boehner (R-Ohio) said in a statement on Monday that “[t]oday’s much-hyped loophole closure does nothing to reduce the cost of pursuing a higher education, or improve access to federal student loans – nor will it help millions of recent graduates struggling to find jobs in the Obama economy.”

Johnson dismissed criticism from Republicans. “The reality is, there’s millions of borrowers that will have more options in repaying their loans,” she said. “It’s a huge win for them and a win for the economy as a whole.”

“This is an issue that affects so many people,” Johnson said. “It’s great to see student loans getting the attention they deserve.”

Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.