President Obama wants to add two million more student borrowers to programs that cap loan payments as a share of income, the White House announced Wednesday.
In the latest effort by the administration aimed at rising student debt balances and soaring delinquencies, the Department of Education also will launch a new website, StudentLoans.gov/Repay, to help steer borrowers into the advantageous repayment plans, cutting through the complexity of loan repayment options.
“Costs are rising too fast, and too many Americans are struggling to pay off their loans,” Education Secretary John King said on a call with reporters Wednesday, noting that he is still paying off his grad school loans.
“There are likely many more who can benefit” from capped-payment plans, King said.
Obama already has taken significant steps to direct student borrowers into income-driven repayment plans and especially into a program he created that caps monthly payments at 10 percent of income and forgives debt after 20 years.
The program prevents students from falling behind or defaulting, a bad outcome that can destroy their credit and cripple their financial abilities. It’s costly, however, to taxpayers, who bear greater subsidies for more students.
The White House did not estimate what its latest effort to promote the plan would cost. The administration has been surprised by the costs associated with the popularity of the program before.
Five million borrowers are currently enrolled in income-driven repayment plans, the White House said.
At the same time, however, problems with repayment have worsened in recent years. Delinquencies have marched upward even as the economy has improved, with nearly 12 percent of the roughly $1.2 trillion in aggregate student loans debt past 90 days due, according to the Federal Reserve Bank of New York, about double the rate of delinquency just over a decade ago. Defaults also have increased, with 3.6 million recipients in default as of the first quarter, as reported by the Education Department.
And Obama’s Education Department has been faulted for its oversight of companies tasked with servicing the debt borrowers, which in some cases have not placed borrowers in the most advantageous plans.
The administration will strengthen the rules for servicers, the White House said Wednesday, strengthening borrowers’ rights by setting minimum standards for servicers and by establishing new accountability requirements.
The Consumer Financial Protection Bureau will develop, and is seeking comments on, a “payback playbook,” a simple set of disclosures and information that must be given to borrowers with their monthly bill.
The White House enlisted more than 40 organizations, schools and businesses to help in the goal of getting two million more borrowers into the plans.
