On June 9, President Barack Obama issued executive actions aimed at easing student loan payments. In response, the U.S. Department of Education (ED) is attempting to strengthen student loan services and help students to better manage their debt. According to the ED, a top priority of the federal student loan programs is to help students obtain and complete quality higher education programs.
Obama plans to use his executive actions to extend the Pay As You Earn (PAYE) program, a repayment process that limits borrowers’ monthly debt payments to 10 percent of their income. The program allows the borrower’s loans to be forgiven after 20 years if they pay on time. If the borrower works in the public service such as for the government and or a nonprofit, then their loans will be forgiven within 10 years.
Yet, the executive actions may not be able to apply to borrowers with more than $57,000 in federal student loans. These students will not be able to have their loans forgiven at the 20 year mark in the PAYE program but instead will have the full 25 years of payments before their loans are forgiven.
Federal law currently allows students to cap loan payments, but the executive orders will extend the ability to cap loan payments to a larger range of students such as those who borrowed before October 2007 or those who have not borrowed since October 2011. While this action will help up to five million more borrowers, it will not be in effect until December 2015.
“I think that this will help the students [who are not] financially stable and need some support to be able to pay back their loans. Also, considering the fact that college tuition is getting more expensive with each coming year, this is going to be really beneficial, “ sophomore Jacy Zeng said.
As stated by the Association of Credit and Collection Professionals, the ED has renegotiated the terms of its contracts with four main federal student loan services in order to strengthen motivations for them to provide excellent customer service and help borrowers keep up with their own payments. These actions will help the department better monitor the performance of the loan servicers as a way to help them continue to improve and to ensure that as borrowers repay their federal student loans, they will receive the highest quality of support, as mentioned by the ED.
“All hard-working students and families deserve high-quality support from their federal loan servicer, and we are continuing to take steps to make sure that is the case,” Secretary of Education Arne Duncan said, according to ED.
According to the Association of Credit and Collection Professionals, the ED Under Secretary Ted Mitchell and the department’s Office of Federal Student Aid will announce a series of opportunities to hear directly from the student loan borrowers and stakeholders about their input for improving the federal student loan program. By the end of this year, the feedback will make key recommendations that will focus on solutions that can assist borrowers.
Counseling and outreach will be used to ensure that borrowers will have payment options more suited towards themselves and will help enhance the student’s and parent’s customer satisfaction. The department also aims to help reset its relationship with student, labor and consumer groups that have grown frustrated with how the department has administered the federal direct loan programs in recent years, as stated by the Inside Higher Ed.
“There are a lot of positives here,” staff attorney at the National Consumer Law Center Deanne Loonin said, according to the Inside Higher Ed. “The department and administration do seem to have recognized the need to improve loan servicing.”