In an attempt to ease crushing student debt, President Obama will sign an executive order Monday afternoon that will allow at least 5 million people to cap their student loan payments at 10 percent of their income.
Obama will direct Secretary of Education Arne Duncan to amend student loan regulations to allow for the payment ceiling, which the administration wants to make available to borrowers by December 2015.
The action is aimed at people who took out loans before October 2007 or stopped borrowing in October 2011. The majority of students with loans already have the option to limit payments to 10 percent of their income because of student loan legislation Obama signed in 2010 and regulations the administration adopted in 2012.
Obama will also announce that the Department of Education will renegotiate its contract with loan providers to give financial incentives to borrowers who pay their loans on time, will cap interest rates for active-duty military members at 6 percent and will partner with tax preparers H & R Block and Intuit, Inc., to provide information about loan repayment and education tax benefits.
The average debt per borrower from the class of 2012 ranged from $17,994 in New Mexico to as much as $33,649 in Delaware.
The education and treasury departments will launch a pilot project that tests the effectiveness of loan counseling programs and the administration will work with a number of professional and community organizations, including the American Federation of Teachers and YMCA to provide information about repayment options.
Obama will also speak about his support for legislation in Congress that would allow students to refinance high-interest debts - both public and private - at a lower interest rate. The proposal, sponsored by Massachusetts Democrat Sen. Elizabeth Warren, would pay for the change by closing a tax loophole that reduces the tax burden for the wealthy.
In his weekly radio address, Obama said taking further action on student loans because college has never been more important - or expensive.
“That’s the choice your representatives in Congress will make in the coming weeks," Obama said. Protect young people from crushing debt, or protect tax breaks for millionaires.”