WASHINGTON — President Obama
on Monday will take executive actions to ease the burden of college
loan debt for potentially millions of Americans, in a White House event
coinciding with Senate Democrats’ plans for legislation to address a
concern of many voters in this midterm election year.
Before an East Room audience, Mr. Obama is scheduled to announce “new steps to further lift the burden of crushing student loan
debt,” said a White House official, who declined to be identified
describing the actions in advance of the president’s event. Despite past
actions by the administration, borrowers’ debt load is growing and
retarding the ability to buy homes, start businesses or otherwise spend
to spur the economy, economists say.
Mr.
Obama’s main action will be to expand on a 2010 law that capped
borrowers’ repayments at 10 percent of their monthly income. The intent
is to extend such relief to an estimated five million people with older
loans who are currently ineligible — those who got loans before October
2007 or stopped borrowing by October 2011. But the relief would not be
available until December 2015, officials said, given the time needed for
the Education Department to propose and put new regulations into
effect.
Also,
Mr. Obama will announce that the department will renegotiate contracts
with companies that service federal loans to give them additional
financial incentives to help borrowers avoid delinquency or default. The
Education and Treasury Departments are to work with the nation’s
largest tax-preparation firms, H&R Block and Intuit Inc., to ensure that borrowers are aware of repayment options and tax credits for college tuition.
The president said in January, in his State of the Union
address, that he would use his “pen and phone” to take executive
actions and enlist private institutions on matters when disputes with
congressional Republicans block legislation.
But
legislation generally is more far-reaching, so Mr. Obama will also urge
passage of a measure that the Democratic-led Senate plans to take up
this week. He plans to discuss the proposal at his Monday event and in a
Tuesday question-and-answer session about student loan debt on the
Tumblr social-networking website.
The
Senate bill, sponsored by Senator Elizabeth Warren, Democrat of
Massachusetts, would allow an estimated 25 million Americans to
refinance student loans, federal and private, at lower interest rates.
Reduced interest payments would cost the government about $58 billion
over 10 years, according to the Congressional Budget Office, but the
legislation would raise $72 billion by imposing a new tax on some
high-income individuals.
Because
of the tax and the bill’s overall cost, it is unclear whether Democrats
can muster enough Republican support to get the 60 votes needed. Even
if they succeed, the Republican-controlled House is likely to ignore the
measure.
Senator
Charles E. Schumer of New York, a Senate Democratic leader who worked
with the White House on the issue, said, “Even though our bill goes
further, the president’s action means something will be done even if
Republicans block it.”
In his weekly address,
Mr. Obama defined the choice before Congress in political terms:
“Protect young people from crushing debt, or protect tax breaks for
millionaires.”
About
$1 trillion in federal student loans or loan guarantees is outstanding,
on top of more than $100 billion in outstanding private student loans
that are not federally guaranteed, the Congressional Budget Office
reported. While economists argue that a postsecondary education is an
investment that pays off, average tuition at four-year public colleges
has more than tripled over the past three decades, according to the
administration, and 71 percent of those who graduated with a bachelor’s
degree carried debt, which averaged $29,400.
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