President Obama to Announce Student Loan Changes
The official said Obama will expand the criteria for an alternative repayment program, which caps monthly payments for certain federal student loans at 10% of a borrower’s discretionary income.
The changes would allow an additional 5 million borrowers to qualify and will be available beginning in December 2015, the official said.
The alternative payment programs are designed to help borrowers struggling under the weight of student loans. They include forgiveness programs for on-time payments and public-sector employees. Teachers can have their balance canceled after ten years, for example. Low-income borrowers can have their balance canceled after 20 or 25 years of on-time payments.
Borrowers who don’t quality for forgiveness but use a repayment program find their monthly payments reduced but spread out over a longer period of time. That means they will pay more over the lifetime of the loan, as there is additional time for interest to accrue.
Income-based repayment and Pay As You Earn aren’t available for borrowers who turn to private institutions rather than the government.
The official said Obama will also voice support for a Democratic proposal on Capitol Hill that would allow borrowers to refinance their student loans. The proposal by Sen. Elizabeth Warren would extend current rates for new borrowers to those with outstanding loans at higher rates.
“While Congress decides what it’s going to do, I will keep doing whatever I can without Congress to help responsible young people pay off their loans — including new action I will take this week,” Obama said in his weekly address on Saturday.
He was scheduled to make the announcement at a 1:45 p.m. event The New York Times first reported the news.
Student loans have been in the spotlight as the amount of debt skyrocketed, taking second place to only home mortgage debt, according to the Consumer Financial Protection Bureau.
On Tuesday, Obama is scheduled to discuss student loan debt and other education topics in a chat on the website Tumblr.
–CNN’s Rachael Shackelford contributed to this report.