President Barack Obama signed an executive order Monday expanding a program that lowers student loan monthly payments for some borrowers.
Obama expanded the “Pay As You Earn” program that has been in effect since 2012, expanding it to roughly 5 million more people by December 2015. That program caps monthly payments to 10 percent of borrowers’ income, and forgives any outstanding balances if borrowers have made loan payments for 20 years, or 10 years for those in public service jobs.
“I’m only here because this country gave me a chance through education,” Obama said today. “We are here today because we believe that in America, no hardworking young person should be priced out of a higher education.”
Obama also endorsed a bill from Massachusetts Democratic Sen. Elizabeth Warren that would allow students to refinance their student loans at better rates.
Both are moves that the liberal-leaning One Wisconsin Now praised.
“The Congressional Budget Office estimates that 20 million borrowers would seek to refinance their loans within the first 18 months of the program’s operation,” One Wisconsin Now spokesperson Mike Browne said. “I think what this shows you is that there’s a huge problem with the interest that people are paying on student loans right now and that given the opportunity to refinance, which they are currently denied, millions of borrowers will take advantage of it.”
U.S. Rep. Tom Petri, R-Wis., however, criticized Obama’s plans, saying in a statement his executive order “moves us in the wrong direction by taking a complicated, expensive repayment option and simply expanding it.”
Petri, for example, has proposed “income-share agreements” where investors provide students with money with the promise that the students will provide those investors with a percentage of their income for a period of time after they graduate.
“Basing payments on income makes sense, but I’m always hearing from students who need affordable payments but don’t take advantage of these options because the system is too confusing and bureaucratic,” Petri said. “At the same time, expanding forgiveness available in the current programs will likely leave taxpayers on the hook for billions in unpaid loans. Instead of expanding policies that aren’t working, we need something different.”