Administration announces plan to ease student loan burden

Wednesday, October 26th, 2011 By

Student loan purchases

The White House announced a new program to help ease the burden of student loans. Image: jennifercw/Flickr/CC BY

Student loans have overtaken credit cards as the nation’s chief source of long term debt. To address this trend, the White House announced a new initiative Wednesday to reduce that burden. The initiative is one of several moves the president is making to boost the economy without the support of Congressional Republicans.

‘Make a big difference’

Education Secretary Arne Duncan discussed the initiative with reporters on Tuesday:

“These are real savings that will help graduates get started in their careers. These changes could make a big difference in the lives of current college students and recent graduates as they enter one of toughest job markets in recent memory.”

The initiative will allow borrowers to consolidate both federally guaranteed student loans and direct loans into one monthly payment. Also, the initiative will cap student loan payments at 10 percent of discretionary income. That is down a third from the previous cap of 15 percent. Also, any unpaid portion of the loan, interest or principle, will be forgiven after 20 years. Previously, that term was 25 years.

Accelerated ‘Pay As You Earn’

The program begins in January, and accelerates the “Pay As You Earn” policy, signed into law last year. Initially, the law did not take effect until July, 2014.

The move comes in response to a petition on the “We the People” forum on the White House website. The petition, asking the White House to forgive student loans, was signed by more than 30,000 Americans. “We the People” is a new addition to the website, and this is the first time the administration has acted in response to a petition on the site.

‘We can’t wait’

The move also is an attempt by the administration to address the down-turned economy with executive orders that do not require the approval of Congress. A White House statement said:

“The announcement is part of a series of executive actions to put Americans back to work and strengthen the economy, because we can’t wait for congressional Republicans to act.”

Congressional Republicans continue to block the passage of Obama’s $447 billion American Jobs Act. Other moves the president has announced this week are a program to help homeowners with out-of-control mortgage debt, and to require community health centers to hire military veterans.


But the new plan will not benefit every student loan borrower who could use it. It will only be available to those who have borrowed for the first time in 2008 or later. Further, to be eligible, borrowers also need to take out a new loan in 2012. The initiative also does nothing to address borrowers who are in default.

No cost to taxpayers

According to Domestic Policy Council Director Melody Barnes, the new program will not add a burden to taxpayers. The administration plans to pay for the program by encouraging borrowers with both federally guaranteed loans and direct loans to consolidate both into the Direct Loan program. In this way, the federal government gets the interest from both loans instead of just one.

Those interested in the program can call 1-800-4FEDAID or go to


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