Though President Obama often uses his weekly address to comment on the major controversies of the day, this week he tried to change the conversation a bit, emphasizing an issue that’s been percolating just below the surface: helping young people with crushing student debt.
This hasn’t gotten much attention lately, but leading Democrats appear eager to change that.
President Obama on Monday will take executive actions to ease the burden of college loan debt for potentially millions of Americans, in a White House event coinciding with Senate Democrats’ plans for legislation to address a concern of many voters in this midterm election year.Before an East Room audience, Mr. Obama is scheduled to announce “new steps to further lift the burden of crushing student loan debt,” said a White House official, who declined to be identified describing the actions in advance of the president’s event. Despite past actions by the administration, borrowers’ debt load is growing and retarding the ability to buy homes, start businesses or otherwise spend to spur the economy, economists say.
The numbers are staggering. As Ayan Chatterjee recently reported, “Student marketing company Edvisors calculates that the average student in the class of 2014 is expected to graduate with nearly $33,000 in debt, with nearly 60 percent of all college students having taken out a student loan. And because the debt burden has risen significantly faster than inflation, up a whopping 361.3% since 2003 according to the New York Federal Reserve, the total pile of student debt in the United States now sits at almost $1.2 trillion dollars.”
To address the problem, the president is moving forward on a worthwhile idea. As Libby Nelson explained, Obama intends to expand a program “that lowers student loan payments to 10 percent of borrowers’ monthly discretionary income” through something called Pay As You Earn, which “offers lower payments for borrowers with low incomes than the traditional 10-year loan repayment plan.” This will not require congressional action.
Under the policy, “Borrowers pay for 20 years or until they’ve paid off the balance, whichever comes first. People working for a nonprofit or for local, state or federal governments are done making payments after 10 years, whether they’ve paid back the loan or not.” Something similar already exists, but Obama’s new executive order will expand eligibility.
The president also wants to make it easier for students to refinance their loans – and that’s where Sen. Elizabeth Warren (D-Mass.) comes in.
Student groups and other organizations focusing on younger Americans enthusiastically support Warren’s bill, under which new interest rates would range from 3.86 percent for loans taken out by borrowers when they were undergraduates to 6.41 percent for parents who took out loans for their children’s college tuition, as well as for borrowers who took out loans to pay for graduate school.The financial industry, perhaps not surprisingly, is less enamored with the proposal. The bill would allow borrowers to refinance loans owned by the private sector into new loans made by the Education Department. Paying off loans early deprives lenders of future interest income, causing paper losses.
Because the bill would be paid for through the “Buffett Rule,” congressional Republicans have vowed to kill it. As an alternative approach towards solving the problem, GOP lawmakers have proposed … nothing.
The White House, however, is throwing its support behind Warren’s bill, which has already picked up 39 co-sponsors, all of them Democrats.
Senate Democratic leaders appear committed to bringing the bill to the floor and have offered to work with Republicans on alternative financing. A vote appears likely later this month, though a GOP filibuster is a near-certainty.
The political world tends to think of immigration and climate as the top policy fights of 2014, but keep an eye on efforts to combat crushing student debt. This will definitely be part of the mix.