On Monday, US President Barack Obama is expected to sign a new executive order that would allow borrowers to pay no more than 10% of their monthly income in student loan payments, Boston.com reports. The measure would expand an existing 2010 law that covers those who have began borrowing after October 2007 through October 2011. The new executive order would also allow those who have borrowed earlier to participate. The measure is expected to allow millions of other borrowers to participate in student loan scheme.
The "Pay As You Earn" borrowing scheme has been pointed out as the main reason on why majority of Americans struggle financially. According to economists, the debt load of the student loan borrowers is continuously growing and has been retarding people the ability to buy their own homes, establish businesses or spend to spur the US economy.
On the other hand, the New York Times said that Obama's latest executive order is meant to combat the issue of the ballooning student debt. The signing of the executive order, which would be happening at the Rose Garden, will also have Obama announcing the Education Department's plans to renegotiate its contracts with companies that service federal loans in order to curb the number of borrowers who defaulted on their debts or who have been delinquent in their payments. The Times said that both the Education and Treasury Departments are expected to work with the largest tax-preparation firms in the country, H&R Block and Intuit Inc, to make sure that borrowers are made aware of financial options and tax credits to be able to repay debt for their college tuition.
Although this might be good news for borrowers, it is highly unlikely that education reforms to address student debts would be addressed by lawmakers real soon. As the US Senate is expected to deliberate this week about legislation that would allow burdened college graduates to refinance their loans, the Times said that the tax and the overall cost of the bill sponsored by Democrat Senator Elizabeth Warren could muster enough support from the GOP for the required 60 votes.
