President Barack Obama announced on Wednesday that he plans to sign an executive order that will ease the financial burden of student loans for many young Americans, including some Harvard undergraduates and graduate students.
Under Obama’s new plan, the federal “pay-as-you-earn” loan repayment program passed by Congress will be accelerated. This program was originally set to allow borrowers in 2014 to pay only 10 percent of the their income toward loan repayment, down from 15 percent previously. Now, the 10 percent cap will be implemented two years earlier, starting this January. Any remaining loans will be forgiven after 20 years, five years earlier than current law requires.
In addition, college graduates who currently have government-backed loans issued by the private sector and direct loans issued by the government will now be able to combine those debts and pay a lower interest rate.
The consolidation will make it “much less likely that [graduates] will default by accidentally missing a payment,” Secretary of Education Arne S. Duncan ’86 said. “These are real savings that will help graduates get started in their careers and make ends meet.”
A majority of Harvard College students graduate debt-free due to the University’s financial aid program. However, some undergraduates do take loans from the federal government.
This new initiative will likely affect a greater number of graduate students, many of whom rely on loans to pay tuition or have accrued debt from their undergraduate years at other universities.
“Harvard College’s strong policy of providing direct grants to students enables them to go to college without borrowing and has helped most of our students avoid debt,” Kevin Casey, associate vice president of Harvard public affairs and communications, wrote in statement. “However, these new repayment options and consolidation incentives announced by President Obama should be of enormous help to young people all over the country, including undergraduates, as well as graduate and professional students.”
Since the Republicans won control of the House in the 2010 mid-term elections, Obama has had difficulty pushing legislation through a highly partisan Congress. His American Jobs Act, which would allocate $447 billion in fiscal stimulus if passed, has been stalled in Congress for over a month.
Duncan said that this student loan initiative did not require Congressional approval, citing executive regulatory authority that allows it to sidestep partisan bickering in the House and Senate.
Director of Domestic Policy Melody Barnes said that these actions are part of the Obama administration’s broader push to take action to boost the economy without having to wade through the Congressional approval process.
According to Barnes, the program comes at no cost to the taxpayer, because the consolidation of debt will result in federal savings.
These changes are consistent with the tone Obama set in his last State of the Union address in focusing on developing skills to remain competitive in the international market.
—Staff writer Tara W. Merrigan can be reached at email@example.com.
—Staff writer Zoe A. Y. Weinberg can be reached at firstname.lastname@example.org.