President Obama signed an executive order Monday that could extend student debt relief to an additional 5 million people — a move aimed in part at better educating young borrowers of their rights while jumpstarting a moribund debate on the issue in Congress.
The order directs the Secretary of Education to increase eligibility for the Pay As You Earn repayment plan (PAYE), which caps certain federal-student-loan payments at 10 percent of a borrower’s income and writes off any unpaid debt after 20 years, or 10 years for those working in the public interest. To date, PAYE has only been available to people experiencing financial hardship who applied for federal loans after October 2007 and continued borrowing after October 2011, and only 200,000 people are currently enrolled. But by the end of 2015, following a lengthy rulemaking process, millions more borrowers could be eligible to apply.
President Obama put forth a raft of other, softer recommendations focused on educating borrowers about their rights before, during and after school, and encouraged voters to demand further action from Congress — namely to pass astudent-loan-refinancing bill introduced in early May by Elizabeth Warren, D-Mass., in the Senate and John Tierney, D-Mass., in the House.
It is thought that a new version of the bill could be introduced as early as this week.