Obama to issue memorandum calling for more efficient student loan process
In an effort to make student loans more manageable, White House officials announced that President Barack Obama will issue a memorandum Thursday calling for better communication to the public and the simplification of the repayment process.
Secretary of Education Arne Duncan and Cecilia Munoz, director of the White House Domestic Policy Council, discussed the president’s plans in a conference call Wednesday afternoon. Several other senior administration officials were also present during the call.
‘Graduating college has never been more important in helping young people to be able to compete in a global economy and unfortunately we all know the cost of college has never been more expensive,’ Duncan said.
The president’s initiative focuses on increasing the awareness of income-based repayment options, which allow borrowers to cap loan payments at 15 percent of their discretionary income. He also hopes to reform the application and management processes.
By Sept. 30, many borrowers will be able to import their income tax information directly from the IRS into an income-based repayment application, Duncan said. The application will be able to be completed in one sitting, similar to the Free Application for Federal Student Aid, he said.
Duncan said there are online and mobile applications being developed in order for students to learn about the program, created in 2007, and to increase financial literacy. There is also a push to inform students this option is available before they graduate, he said.
‘We’re absolutely convinced that a significant percentage of defaults will be avoided, simply by helping young people better understand their choices and making the right financial decisions,’ he said.
Though officials could not provide estimates of how many defaults would be avoided, they reasoned there are only currently 700,000 out of 35 million borrowers participating in the program.
President Obama has taken additional steps to help alleviate financial issues posed by student loans, said Munoz, director of the White House Domestic Policy Council.
Pell Grants have been extended to more than 3 million Americans and legislation signed in 2009 will lower the cap on income-based repayment options to 10 percent starting in 2014, she said.
After the call, officials answered questions from the press, many of which pertained to the impending July 1 deadline for keeping student loan interest rates doubling from 3.4 to 6.8 percent.
Munoz said she hopes House Speaker John Boehner changes his stance of this being ‘a phony issue’ so that a compromise between the two parties can be reached. If not, many students will be paying an additional $1,000 on each of their loans, she said.
‘We are hopeful that a solid, bipartisan process on the Hill can get us to a solution,’ Munoz said. ‘We’re looking forward to that day.’
Published on June 6, 2012 at 12:00 pm
Contact Dylan: dmsegelb@syr.edu | @dylan_segelbaum
