Executive Order Makes More Students Eligible for Lenient Loan Repayment

June 17, 2014

President Obama signed an executive order last week to make more graduates eligible for lenient student loan repayment, reports Reason.com.

The executive order allows all student loan borrowers to qualify for easy repayment options:

  • Before the order, only students who borrowed federal Stafford loans after 2007 were eligible for the government's more forgiving repayment plan, which allows borrowers to pay just 10 percent of their income each month towards their student loan debt.
  • After 20 years, the government writes off the debt entirely.
  • For those working in the public sector, the government writes off the loans after just 10 years.

Additionally, the president threw his support behind a Senate bill sponsored by Senator Elizabeth Warren (D-Mass.) that would allow students to refinance their loans at lower interest rates.

All that these bills do, however, is forgive and reward reckless borrowers while simultaneously incentivizing colleges to raise their tuition prices. Students know that the government will bail them out if they get into trouble, so they have no reason not to take out larger loans, and colleges know that they can raise tuition costs as a result.

Source: Robby Soave, "Obama: We Have to Do Something About Student Debt and This Is Something," Reason.com, June 10, 2014. 

 

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