ATLANTA – President Obama laid out a plan Tuesday to protect borrowers and make it easier for them to repay their federal student loans, avoid default and understand more clearly where their money is going.
Obama unveiled what he called a Student Aid Bill of Rights before a loud crowd of about 9,500 here at Georgia Tech. The executive action, which Obama signed in the Oval Office on Tuesday morning, seeks to protect student loan borrowers by requiring the companies that service student loans to be more forthcoming with information about how loans are handled and creating a Web site where borrowers can keep track of multiple loans.
“Higher education has never been more important, but it’s also never been more expensive,” Obama said in his speech at McCamish Pavilion.
The action is one of a series that Obama has taken in recent months to try to improve access to higher education, including a plan to make community college free, setting up income-based repayment options and capping student loan payments at 10 percent of borrowers' incomes. About 40 million Americans carry student debt, and the average burden is about $28,000.
“One of the things that’s been uppermost on my mind is how do we make sure that every young person in this country who is willing to put in the effort can afford to go to college?” Obama told reporters in Washington on Tuesday.
The executive action requires student loan servicers – the middlemen with whom borrowers interact when repaying federal loans – to be more transparent. It stipulates that these servicers let borrowers know when they become delinquent on payments. The companies must work with borrowers who are behind on payments to ensure that they are not charged excessive fees.
To help borrowers avoid falling behind, companies must make it clear to them when their loans are transferred from one servicer to another and ensure that payments are applied first to loans with the highest interest rates unless borrowers instruct the companies not to do so.
He chided congressional Republicans as not adequately addressing the needs of indebted graduates in their education budget and said that he is considering legislative action to help.
“We’re gonna take a hard look to see if we need new laws to strengthen protections for borrowers,” Obama said but acknowledged that there is no “silver bullet” to fix the problem of mammoth student debt.
The memorandum ordered administration officials to study whether changes to bankruptcy laws would be needed. Student loans cannot currently be discharged in bankruptcy, but other types of debt, including mortgages and credit card balances, can be wiped out. Obama also called for officials to review whether changes to statues and regulations are needed when it comes to flexible repayment options for all borrowers. They will also review whether mortgage and credit card protections can be applied to people with student loan debt.
The administration will set up a centralized Web site where borrowers can file complaints against lenders, schools, collection agencies and student loan servicers. It will not be operational until July 2016.
Obama brought back some of the rhetorical flourishes of his election campaigns and urged students to organize – not on a partisan basis or as for an election – to raise awareness of the burden of education loans and to try to change the system.
“We’re going to mobilize a coalition around the country,” Obama said. “We’ve got to mobilize the entire nation, and it’s going to start with students themselves.”
Obama has long spoken about the burden of student loans and the cost of education in personal terms. He and first lady Michelle Obama got scholarships and took years to pay down their student debts. They were still paying off their loans while they were supposed to be saving for their daughters’ college education, he said. Obama said that his grandfather went to college on the GI bill and that his mother was able to finish graduate school because of grants.
“We did not come from families of means,” Obama said to deafening applause. “This is why this has been such a priority for me. When I look out at all of you, I see myself.”