President Barack Obama took action Monday to alleviate some of the burden of student loan debt on college students across the nation.
The presidential memorandum outlined several actions, including increasing eligibility for the federal Pay As You Earn Repayment Plan, which keeps student loan repayments affordable based on income, and developing strategies to communicate with struggling borrowers. In a speech at the signing of the memorandum, Obama said he aims to renegotiate contracts with private loan servicing companies such as Sallie Mae.
“I’m only here because this country gave me a chance through education,” Obama said at the signing. “We are here today because we believe that in America, no hardworking young person should be priced out of a higher education.”
Currently, only students who were first-time borrowers after Oct. 1, 2007, are eligible for the Pay As You Earn Repayment Plan, which caps monthly repayment at 10 percent of a borrower’s discretionary income. The presidential action would expand eligibility to include students outside of this framework.
In addition, the U.S. secretary of education and the U.S. secretary of the treasury were directed to develop a pilot project for loan counseling resources.
These executive actions were accompanied by an endorsement for a bill authored by Sen. Elizabeth Warren, D-Massachusetts, which would give students an opportunity to refinance high-interest federal loans so they can pay the same interest rates as new borrowers. But the bill, called the Bank on Students Emergency Loan Refinancing Act, was blocked by Senate Republicans on Wednesday.
The bill would have been funded by the implementation of the Buffett Rule, which limits the ability of the wealthy to utilize tax rates and loopholes to pay a lower proportion of their income in taxes.
According to federal student loan data, nearly a third of federal direct student loan funds are in default, deferment or forbearance.
“Higher education should be a pathway to opportunity not to lifelong debt,” said UC President Janet Napolitano in a letter thanking Senators Dianne Feinstein, D-Caliornia, and Barbara Boxer, D-California, for co-sponsoring the bill.
According to the presidential memorandum, 71 percent of students earning a bachelor’s degree in the United States graduate with debt, which is, on average, more than $29,000 per student. In the UC system, about half of students last year graduated with debt, which was, on average, just under $19,000, UC spokesperson Dianne Klein said in an email.
Campus spokesperson Dan Mogulof said that at UC Berkeley, 40 percent of students graduate with debt and that the average debt is less than $20,000. He added that Obama’s initiatives will help support a key part of the campus’s public mission.
“So many people at Berkeley want to pursue careers that have a public service aspect. That’s part of who we are,” Mogulof said. “Those are careers and jobs that tend not to pay as much as other jobs. (With Obama’s loan initiatives) they are not going to be discriminated against financially about the choices they make with their careers.”
Mogulof said there have been several campus initiatives to alleviate financial tension for students, such as a program which caps the contribution middle-class parents have to make toward the cost of attendance, an increase in the number of endowments that support undergraduate scholarships and a marginal increase in the number of nonresident undergraduates to ensure sufficient revenue for the campus financial aid program.
Not all, however, believe these reforms are the best way to address the issue of student debt.
“This is an example of a reform that reinforces an inherently flawed system,” said ASUC Senator-elect Austin Pritzkat. “(Obama’s) memorandum and his actions ultimately normalize student debt and, in reality, do little to specifically address issues related to access to higher education.”
He added that public higher education used to be nearly free of cost and that public divestment and privatization of the university were factors in the significant increase in tuition rates over the past decade.
“We have almost no concept of what free higher education looks like,” Pritzkat said. “That’s something we should be striving for.”