Congressman John Garamendi, a former University of California Regent and California State University Trustee who represents the UC Davis community in Congress, praised President Obama’s decision to ease the crushing burden of college loan debt for five million student borrowers.
Under the President’s plan, being drafted by the Department of Education with a planned implementation by December 2015, an estimated five million borrowers with federal student loans will be able to cap their monthly payments at just 10 percent of their income.
“No one should be priced out of an education. Student loan debt is out of control in America. It’s preventing students with loans from taking the entrepreneurial risks that jumpstart economies, stopping students from taking public service jobs, and causing many students to think twice before enrolling in the college education that could forever improve life for them and their families,” Congressman Garamendi said.
Congressman Garamendi added, “In 2010, I was proud to vote for a substantial student loan reform that created a fairer system for new borrowers. It cut out the for-profit middlemen and capped yearly student loan payments at 10 percent of one’s income. It was an important step, but people who already had loans were not included in that reform. I’m glad the President is taking this step, helping five million more borrowers finally escape the crippling burden of student loan debt.”
On Monday, President Obama delivered remarks at the White House, announcing new executive actions to further lift the burden of crushing student loan debt, including a Presidential Memorandum that will allow an additional 5 million borrowers with federal student loans to cap their monthly payments at just 10 percent of their income.
Back in 2009, President Obama pledged, “We will provide the support necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world.”
“More students than ever before are relying on student loans to pay for their college education. 71 percent of students earning a bachelor’s degree graduate with debt, averaging $29,400. While most students are able to repay their loans, many feel burdened by debt, especially as they seek to start a family, buy a home, launch a business, or save for retirement,” the White House stated in a release.
He stated on Monday that, while his executive action will “make progress, but not enough,” Congress needs to take action as well. He brought up the bill written by Senator Elizabeth Warren that would allow students to refinance their student loans at today’s lower interest rates, noting that “it pays for itself by closing loopholes that allow some millionaires to pay a lower tax rate than middle-class families.”
“We are here today because we believe that in America, no hardworking young person should be priced out of a higher education,” President Obama stated. “This country has always made a commitment to put a good education within the reach of young people willing to work for it.”
The plan is modest, helping a typical student save about $2000 over the course of their loans.
“Because credit ratings are increasingly scrutinized in making employment offers, financing a home, or even opening a bank account, a damaged credit rating can further reduce borrowers’ ability to repay their loans. Today’s actions build on the Administration’s significant progress in creating flexible repayment options for borrowers and raising awareness about the steps borrowers can take to responsibly manage their debt,” a fact sheet stated.
The President directed “the Secretary of Education to ensure that student loans remain affordable for all who borrowed federal direct loans as students by allowing them cap their payments at 10 percent of their monthly incomes. The Department will begin the process to amend its regulations this fall with a goal of making the new plan available to borrowers by December 2015.”
Congressman Garamendi is also a cosponsor of H.R. 4582, the Bank on Students Emergency Refinancing Act, which would help 25 million borrowers nationwide refinance their existing federal and private student loans to lower interest rates, similar to those that are currently available to new student loan borrowers. In total, American families would save around $55 billion under the legislation, which they can then reinvest in their local economy.
Specifically, a recent analysis of the Bank on Students Emergency Refinancing Act by the Congressional Research Service shows that a middle-class undergraduate student borrower with an average loan debt would save more than $4,000 over the life of his or her loan. A typical graduate student would save more than $2,500, and parents who borrowed to pay for their child’s education would save more than $3,500. President Obama spoke favorably about this legislation in his remarks today.
The release from Garamendi stated, “The President’s plan is a furtherance of the college loan reform that Congress passed in 2010, legislation that was strongly supported by Congressman Garamendi. That reform ensured that all recipients of new federal college loans could cap their repayment at 10 percent of their income, with outstanding balances forgiven after 20 years of payment or 10 years of payment for those working in public service jobs like teaching and nursing.”
“However, the student loan reform did not extend to loans issued before the law,” the released stated. “Today’s action paves the way for older student loans to be grandfathered into a system more favorable toward students in debt.”
Over the past three decades, the average tuition at public four-year colleges has more than tripled, while family incomes have remained stagnant. 71 percent of those earning a bachelor’s degree graduate with debt, which averages $29,400.
Under the President’s proposal, a 2009 graduate earning about $39,000 a year as a fourth year teacher, with student loan debt of $26,500, would have his or her initial monthly payments reduced by $126 a month, an annual reduction in loan payments of more than $1,500.
—David M. Greenwald reporting