Within breaking student loan news, this afternoon President Obama signed an executive order designed to provide repayment relief to struggling student loan borrowers. Obama’s program attempts to relieve student debt pressures and decrease defaults in three main ways:
- Helps existing borrowers lower monthly payments by expanding the Pay out As You Earn (PAYE) student loan repayment plan to all Government Direct Loan borrowers. Earlier restricted to “new” student loan borrowers, defined as those without any federal loan financial debt as of October 1, 2007 along with at least one loan borrowed since October 1, 2011, PAYE will become open to all Federal Direct Loan borrowers by 2015, an expansion to about 5 million additional graduates. PAYE repayment caps monthly minimum payments at 10 percent of a borrower’s discretionary income. Get more details on the PAYE repayment plan .
- Requires the Department of Education and learning to renegotiate contracts with federal government student loan servicers such as Sallie Mae. The renegotiated contracts will give you financial incentives to servicers to give better customer service and help borrowers avoid default.
- Provides expanded access to student loan repayment and tax incentive information through private sector businesses, professional associations, community groupings, tax preparers, and social media. In this spirit, President Obama will host a Q& A on education, college access, and reducing student loan debt on Tumblr tomorrow. Questions can be submitted here .
Though not part of the executive purchase, President Obama also took a chance to throw his support behind Senator Elizabeth Warren’s student loan refinance proposal , which would enable graduates with high interest rate student loans to refinance their education financial debt at today’s lower rates. The bill is expected to end up being voted upon by Congress within the week. Read more about Warren’s refinance proposal .
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