With Congress still deadlocked on how to keep student-loan interest rates from doubling next month, President Obama is set to unveil a series of small-bore measures designed to grant some relief to the millions of Americans shackled by college debt.
In a Thursday memorandum to the federal Education Department and the Internal Revenue Service, the president will outline a series of steps to publicize the income-based student loan repayment system, which limits borrowers’ monthly payments to 15 percent of their discretionary income. Later this year, the limit will drop to 10 percent for some borrowers.
“We think there are literally hundreds of thousands, millions potentially, of people out there who could be eligible for this. There’s a big marketplace out there that we’re not reaching,” Education Secretary Arne Duncan told reporters in a conference call Wednesday afternoon. “We think this could be a really important tool to help folks that are struggling … part of the challenge has been that it’s complicated.”
Of the more than 30 million Americans repaying student loans now, only about 700,000 use income-based repayment, administration officials said. Borrowers — not all of whom will be eligible for the program — must apply for it, a process accompanied by piles of paperwork spread across federal departments and agencies.
To change that, the administration is creating a revamped online application process that will let borrowers input information to the Education Department and the IRS at the same time, rather than submitting forms separately to each agency. The memorandum will also call for new online and mobile-phone applications to “help students make better financial decisions, including understanding their loan debt and its impact on their everyday lives.”
Administration officials are also calling on colleges and universities, along with others in the realm of higher education, to better educate students on the options available to them, such as income-based repayment. By next year, the Education Department will establish “model exit counseling,” an example for institutions of how to talk with their students about college debt.
But the measures likely will have little effect if loan interest rates skyrocket July 1. Republicans and Democrats both want to keep the annual subsidized loan rate at 3.4 percent, but are split on how to come up with the roughly $6 billion in losses to the federal treasury.
The GOP has offered a variety of measures, including increasing the amount that federal workers contribute to their pensions. Other suggestions have included reducing Medicaid reimbursements to states. Democratic ideas have included raising some taxes on wealthy Americans.
Each side blames the other for the delay.
Senate Minority Leader Mitch McConnell on Tuesday called the White House’s approach and lack of compromise “inexcusable.” On Wednesday, Sen. Tom Harkin, Iowa Democrat and chairman of the Senate Health, Education, Labor and Pensions Committee, said the GOP ideas are “not acceptable.”