Obama Pursues Regulatory Change to Ease Student Loan Costs, as Senate Bill Fails
Proposed legislation allowing borrowers with federal student loans to refinance their debt at today's lower rates will not be going to the U.S. Senate floor for a debate.
In a June 11 vote of 56 to 38, the measure, sponsored by Sen. Elizabeth Warren (D-Mass.) and endorsed by President Obama, fell short of the 60 votes need to advance to the Senate floor for consideration.
The bill would have affected an estimated 25 million borrowers, saving each an average of $2,000. The reduction in loan payments would have been covered with revenue from the so-called "Buffett Rule," which sets minimum tax rates for people making over $1 million.
While lawmakers failed to agree on that idea, President Obama is leveraging his executive powers to provide relief for student borrowers. On June 9, he signed a memorandum directing the U.S. Secretary of Education to propose regulations that would allow approximately 5 million more students to qualify for the Pay As You Earn program, which caps borrowers' repayments at 10 percent of their monthly income and forgives loans after 20 years.
The memorandum also called for new targeted strategies to get information to borrowers who may be struggling to repay their federal student loans about repayment options. Obama would also like to see the government develop a pilot project to test the effectiveness of loan-counseling resources.
In a press call with reporters on June 10, White House officials voiced support for the Warren bill, as one of several measures in play that could help students better manage their college debt.
When asked about the cost of the president's directives, Cecilia Muñoz, the director of the White House Domestic Policy Council, said the proposal is part of the administration's budget and is intended to be revenue neutral. The actual cost of extending Pay As You Go to all borrowers won't be known, she added, until people enroll in the program, she said.
For an overview of the issue, check out 5 Things to Know about the President's Latest Student Debt Relief Plan in The Wall Street Journal.
College affordability is an issue of growing concern to families. Recent surveys show incoming students increasingly say price is a major factor in their decision on which college to attend.