WASHINGTON — President Obama on Monday will take executive actions in an attempt to ease the burden of college loan debt for potentially millions of Americans, in a White House event coinciding with Senate Democrats’ plans for similar legislation to address a concern of many voters in this midterm election year.
Before an East Room audience, 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 the administration’s past actions, borrowers’ debt load is growing and slowing the ability to buy homes, start businesses, or otherwise spend to spur the economy, economists say.
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 5 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, 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 two 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 where disputes with congressional Republicans block legislation.
A bill sponsored by Elizabeth Warren would allow 25 million Americans to refinance student loans.
But bill generally is more far-reaching. So Obama will also urge passage of a measure that the Democratic-led Senate plans to take up this week, discussing that at his Monday event and in a Tuesday question-and-answer session about student loan debt on Tumblr, the social-networking website.
The Senate bill, sponsored by Senator Elizabeth Warren, a Massachusetts Democrat, would allow an estimated 25 million Americans to refinance outstanding 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.
The tax and the bill’s overall cost make it virtually certain, however, that the Republican-controlled House would not consider the measure.
About $1 trillion in federal student loans or loan guarantees are outstanding, on top of more than $100 billion in outstanding private student loans that are not federally guaranteed, the Congressional Budget Office reported.
Although 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 graduating with a bachelor’s degree carry debt that averages $29,400.