New York Times Editorial: Student Borrowers and the Economy
June 10, 2014
President Obama took an important step this week when he signed an executive order providing relief to millions of struggling student loan borrowers and urged Congress to pass a student loan refinancing bill that is scheduled for a vote in the Senate on Wednesday. Both the executive order and the refinancing bill speak to a grave problem that has trapped recent college graduates and threatens the long-term health of the economy.
The executive order signed on Monday will help up to five million student loan borrowers. It will expand access to the federal government's Pay as You Earn program, which allows borrowers to arrange affordable payments and qualify for loan forgiveness. It requires the Department of Education to evaluate more stringently how well the companies that collect federal loans keep borrowers out of default. Most significantly, it requires the department to help people who have defaulted rehabilitate their records through a program allowing lower payments.
Homeowners, businesses and individuals can take advantage of low interest rates to refinance their debts. Student borrowers, however, have few such options. The Senate bill, known as the Bank on Students Emergency Loan Refinancing Act, would create a fund - paid for by a new minimum tax on millionaires and billionaires - that would be used to help people with federal or private student loans refinance those loans at lower interest rates.
The bill might pass the Senate, but House Republicans will oppose any such tax. Still, by bringing the matter to a vote, Senate Democrats underscore the need to do something about dire indebtedness among recent graduates, and also give members of their party a potent issue on which to run in the midterm elections. Even if the refinancing bill were to become law, it would represent only part of the solution. To get a handle on this problem, Congress needs to reconfigure the student aid system to prevent the most vulnerable student borrowers from falling too deeply into debt in the first place.
Read the full editorial on the New York Times website here.