On June 9, President Obama issued an executive order to ease the burden of student loan debt. The president directed the Secretary of Education to expand an existing law allowing students to cap their payments at no more than 10 percent of their monthly income.
The 2010 law, “Pay as You Earn,” applied only to those who took out a student loan after October 2007. The new regulations, which will take effect in December 2015, expand the program to those who took out loans prior to October 2007, and allow an estimated 5 million more borrowers to qualify for the lower monthly payments.
The President’s memorandum also outlined executive actions to support federal student loan borrowers who are at risk of defaulting.
In his remarks, President Obama expressed strong support for Senator Elizabeth Warren’s student loan bill, stating that his own executive order “makes progress, but not enough.”
Warren’s bill would refinance student loans at a much lower rate, cutting interest payments for many students in half. The bill would pay for the lower interest rates by adopting the Buffet Rule, which raises the marginal tax rate on income in excess of $1 million.
Though the executive order is modest, it signals a move in the right direction. The announcement comes at a key moment as Senator Warren’s bill is expected to be voted on in the Senate as early as Wednesday of this week.
The joint efforts by President Obama and Senator Warren also echo broader concerns about growing inequality. As Senator Warren put it, “Does this country protect millionaires’ and billionaires’ tax loopholes? Or does it try to help young people who are just starting their economic lives?”
Both of these measures are important steps that will relieve millions of student loan borrowers by lowering their monthly payments and interest rates, and protecting them against default. However, solving our student debt crisis in a lasting way will require holding universities accountable for keeping tuition costs down and allocating resources appropriately.
The staggering national student debt of $1.2 trillion has come at a time of rising inequality not only in the United States but also on college campuses. Our research shows that university presidents and administrators are making more money than ever as students go deeper into debt and permanent faculty are replaced with low-wage and temporary ones.
Universities that receive federal dollars should be required to reduce administrative spending and shift resources back to students and the quality of instruction.
Until both lawmakers and universities prioritize reinvesting in America’s young people, the student debt crisis isn’t going anywhere.