Since President Barack Obama was elected in 2009, the federal student loan debt increased to 517 percent. The Federal Reserve Bank of New York estimated the student loan debt at $1.1 trillion with $650 billion in credit card debt.
Although students who have loans have a grace period of six months after graduation before their first payment, this does not erase the fact that the debt is there and it will not go away soon. For this reason, new graduates must get some sort of employment, even if it is not their dream job, just to start paying off bills.
Just last week, Obama stated new executive actions to enable five million student loan-borrowers to limit their monthly payments at 10 percent of their income. The President also stated that any remaining loan debt after 20 years should be forgiven.
These executive actions are only applicable to borrowers who took out their first loan after September 30, 2007 and continued to borrow money after September 30, 2011. It will also be an option for those who will start borrowing on July 1.
— ValueWalk (@valuewalk) June 13, 2014
— Barack Obama (@BarackObama) June 12, 2014
In a statement, Obama said, “We’re still seeing too big a debt load on too many young people. The outrage here is that they’re just doing what they’ve been told they’re supposed to do. I can’t tell you how many letters I get from people who say, ‘I did everything I was supposed to, and now I’m finding myself in a situation where I’ve got debts I can’t pay off.’”
In addition to the new executive actions, Obama also urged the U.S. Department of Education to improve publicity on income-based repayment programs that are available to borrowers. He also stated that the government will be renegotiating their terms with loan servicing companies in order to aid borrowers, especially those who are struggling with their debts.
According to Cecilia Muñoz, Obama’s top domestic policy adviser, the new proposals on student loans will ultimately save taxpayers money through reducing the defaults on student loans. The Obama administration has been proposing to expand the income-based repayment program for the past two years, and they are aiming to target all borrowers, regardless of when they took out a loan.
Obama also said that loan companies are “in the business of helping out students” and they are not there just to collect payments. “They owe young people the customer service, and support, and financial flexibility that they deserve.”
Officials will begin negotiating new terms on loan servicing contracts when they expire this summer.
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