After nearly three weeks focusing on foreign policy, President Barack Obama returned to domestic policy and his economic opportunity program in his weekly address released on Saturday morning, June 7, 2014 where Obama discussed college affordability. Obama promised in his weekly address entitled "Supporting America's Students" that "we've got to do more to lift that burden." This includes signing a new executive order at White House event on Monday, June 9, 2014 which will expand the "Pay As You Earn" program, aims to ease debt load for older college graduates and supporting the Senate Democrats' new legislation to refinance student loans at lower rates.
Student loan debt is crushing and debilitating college graduates and the federal student loan debt reached the trillion dollar mark in July 2013, and is growing to 1.2 trillion this year, while private loans top at $100 billion. Obama mentioned the economic realities that come with college graduation in his weekly address; "This is commencement season, a time for graduates and their families to celebrate one of the greatest achievements of a young person's life. But for many graduates, it also means feeling trapped by a whole lot of student loan debt."
President Obama also described the economic benefits of graduating from college or university versus stopping with only a high school diploma; "In a 21st century economy, the surest pathway into the middle class is some form of higher education. The unemployment rate for workers with a bachelor's degree is just 3.3 percent - about half what it is for high school graduates. The typical graduate of a four-year college earns $15,000 more per year than someone with just a high school degree."
The advantages of graduating college has its drawbacks predominating the overwhelmingly student loans that have to be repaid after graduating. The cost of the college has grown and with it the amount of the loans needed to graduate. Obama recounted; "Over the past three decades, the average tuition at a public four-year college has more than tripled. The average undergraduate student who borrows for college now graduates owing almost $30,000. And I've heard from too many young people who are frustrated that they've done everything they were supposed to do - and now they're paying the price."
Meanwhile, as President Obama has done for other elements of his economic opportunity program, he intends to take executive action, which according to a White House official the president will announce "new steps to further lift the burden of crushing student loan debt" at an event in the White House's Rose Garden on Monday, June 9, 2014. The White House Official further explained; "Many student loan borrowers are working and trying to responsibly make their monthly payments, but are nonetheless struggling with burdensome debt." The event will also be attended by Vice President Joe Biden's wife Jill Biden and Education Secretary Arne Duncan.
There is concern the debt load will interfere with the economy and purchasing power of these borrowers, never mind the personal complications. The White House official that revealed the plans for the executive order, explained; "The challenges of managing student loan debt can lead some borrowers to fall behind on their loan payments and in some cases even default on their debt obligation, with such consequences as a damaged credit rating, losing their tax refund, or garnished wages."
President Obama touted his own past work to ease debt for college and university graduates; "That's why, since I took office, I've worked to make college more affordable. We reformed a student loan system that gave away billions of taxpayer dollars to big banks and invested that money where it makes a bigger bang - in helping more young people afford a higher education.… I've taken action on my own to offer millions of students the opportunity to cap their monthly student loan payments to 10% of their income."
Obama was referring to the student loan overhaul legislation from 2010, which capped student loans monthly payments to 10 percent of a graduates' income starting in 2011. The bill also forgave student loan debts in 20 years, and 10 years for graduates who choose to work in public service. The bill essentially reformed the federal student loans program whereas the loans were now provided through private financial companies that had "performance-based contracts with the Department of Education."
President Obama alluded to the new executive order he will sign on Monday in his weekly address; "while Congress decides what it's going to do, I will keep doing whatever I can without Congress to help responsible young people pay off their loans - including new action I will take this week." The executive order speeds up the "waiting period" for the congressionally passed Income-Based Repayment plan (IBR), which dropped interest rates from 15 to 10 percent.
The executive order will twofold, first it will expand of the 2010 law, providing the same relief for college graduates who graduated prior to October 2007 or stopped receiving loans before October 2011. That group or college borrowers were not included in the 2010 student loan and overhaul, and include 5 million student loan borrowers. The new executive action however, will only commence in December 2015, starting then that group will be able to cap their student loan payment to 10 percent of their income.
Secondly, as the New York Times explained, the order will "direct" the Treasury and Education departments "to renegotiate contracts with federal student loan servicers to encourage them to make it easier for borrowers to avoid defaulting on their loans." Obama wants these companies including H&R Block and Intuit Inc. to alert borrowers that there are options such as "tuition tax credits and flexible repayment options."
The Senate is currently has a bill that will be put to a vote this upcoming Wednesday, June 11 aimed at refinancing student loans. The bill sponsored by Sen. Elizabeth Warren, D-MA will allow student loan borrowers to refinance their current loans at lower rates of 3.86 percent introduced last year, helping a total of 25 million borrowers. Warren explained the rational to CBS News, saying that "With interest rates low, homeowners have been refinancing their mortgages. But the federal government does not let people who holding student loans refinance down to the lower interest rates available. This bill would say yes, they can refinance."
The bill has 39 Democrats co-sponsoring it, but the support is not enough to for it to even advance in the Senate. Republicans oppose the bill because it will be paid for by "enacting the 'Buffett Rule,'" raising taxes on the wealthy, those who make over a million each year. The bill will cost $58 billion for 10 years, but the revenue on the new taxes for the wealthy will generate $72 billion. President Obama intends to urge Congress again to pass the bill at the Monday, June 9 Rose Garden event.
Obama first urged Congress to pass the bill in his weekly address; "But Congress needs to do its part. The good news is that Senate Democrats are working on a bill that would help more young people save money. Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans. And we'd pay for it by closing loopholes that allow some millionaires to pay a lower tax rate than the middle class." The president also as usual attacked Republican opposition, putting it starkly "That's the choice that your representatives in Congress will make in the coming weeks - protect young people from crushing debt, or protect tax breaks for millionaires."
Obama promised in 2014 State of the Union Address in January to use his "pen and phone" and to ensure a year of economic action when Congress refuses to act. This executive order will join the over 20 executive actions the president has signed since January. The order is also part of economic opportunity program aimed at helping the Americans reach or live comfortably in the middle class. While the Senate bill is "part" of the Democrats midterm election year middle-class economic "fair shot" agenda. Obama will continue on Tuesday, June 10 with his student loan push with and online "question and answer" period on social media site Tumblr.
- President Barack Obama's Weekly Address: Supporting America's Students, June 7, 2014 - Transcript | mp4 | mp3
- Senate Bill S. 2432: A bill to amend the Higher Education Act of 1965 to provide for the refinancing of certain Federal student loans, and for other purposes. Click here to read the full text of this bill on THOMAS.
Bonnie K. Goodman is the Editor of the Academic Buzz Network, a series of political, academic & education blogs which includes History Musings: History, News & Politics. She has a BA in History & Art History & a Masters in Library and Information Studies, both from McGill University, and has done graduate work in Jewish history at Concordia University as part of the MA in Judaic Studies program. She covers US, Canadian & Israeli politics, with a particular focus on the Obama presidency, Congress, domestic policy, and elections.