President Obama said Tuesday that the federal government must play a greater role in helping students manage college debt by establishing a “student aid bill of rights” that puts restrictions on lenders in the name of making higher education more affordable.
Republicans countered that the administration instead should focus on making it easier for families to save for college rather than address debt after it is incurred.
Mr. Obama announced the initiative — the latest in a series of steps on college affordability, including a plan to offer two years of free community college to all Americans — at a time when student debt has reached a record high of $1.2 trillion, with the average borrower owing about $28,000 after graduation.
In a speech at Georgia Tech University, Mr. Obama said those figures must be reduced so graduates aren’t held down by insurmountable debt as they start their careers.
“We want to make this experience more affordable because you’re not just investing in yourself. You’re investing in your nation,” the president said. “We’ve got more to do, all of us, universities, students, parents, financial institutions and, yes, the government, to make sure you’re not saddled with debt before you even get started in life. That’s something that is in all of our interests.”
Mr. Obama’s student bill of rights, which became official with a presidential memorandum signed Tuesday morning, is built on four tenets:
⦁ “Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.”
⦁ “Every student should be able to access the resources needed to pay for college.”
⦁ “Every borrower has the right to an affordable repayment plan.”
⦁ “Every borrower has the right to quality customer service, reliable information and fair treatment, even if they struggle to repay their loans.”
House Republicans already have approved an expansion of 529 college savings accounts, which Mr. Obama previously wanted to open up to taxation.
He ultimately abandoned the plan and 529s remain tax-free, but Republicans say the fact that he even considered taxing the accounts proves that Mr. Obama doesn’t truly grasp the root causes of rising student loan debt.
“If the president was truly committed to making college more affordable, he wouldn’t have proposed taxing the very savings accounts millions of Americans use to pay for college,” said Mike Ricci, a spokesman for House Speaker John A. Boehner, Ohio Republican. “By expanding 529 accounts, we can make college more affordable and easier to plan.”
Mr. Obama’s bill of rights establishes protocols for lenders and gives borrowers more power. The administration wants a greater level of disclosure from private lenders so borrowers have a better understanding of who is servicing their accounts. Borrowers also must be provided with additional information on how to set up monthly payment plans or otherwise tweak repayment options and must be informed when their accounts are transferred to another party.
Lenders also will be required to apply any prepayments to the loans with the highest interest rates unless the borrower requests otherwise, a move designed to help students get out of debt faster. The administration says it will crack down on student loan debt collectors and seek to ensure “they charge borrowers reasonable fees and help them return to good standing.”
Mr. Obama said he may do more in the future.
“We’re going to take a hard look at whether we need new laws to strengthen protections for new borrowers,” he said. “We’re trying to tackle this problem from every angle. There’s no silver bullet.”
Advocacy groups said it’s a key step toward tackling the nation’s student debt epidemic.
“Every American deserves access to the resources to pay for college, an affordable loan repayment program, and reliable information about their loans,” said Maggie Thompson, campaign manager for Higher Ed Not Debt, an advocacy group focused on reducing debt burdens.