Mr. 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 five 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.The White House released a fact sheet on the proposal.
Also, Mr. 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 the nation’s largest tax-preparation firms, H&R Block and Intuit Inc., to ensure that borrowers are aware of repayment options and tax credits for college tuition.
Obama also endorsed Sen. Elizabeth Warren's legislation to revamp the federal student program. It would allow people to refinance their existing high-rate student loans at a lower rate. The new rates would be capped at 3.86 percent for individuals who took out undergraduate loans and 6.41 percent for parents who took the loans for their children and for graduate school borrowers. The lower loan rates would be paid for through higher taxes on the wealthy. So, of course, Republicans are opposed. And, of course, they will block it.
The plans by both the president and Warren are a key part of the Democratic 2014 "Fair Shot" agenda, a focus on the key economic issues for the middle class, and an effort to energize the base. The difference is that President Obama has the power of the executive office so that he can make at least part of this happen. That's good politics because it has results. Warren's legislation is good politics, too, because it highlights one more time that the Republicans are working against the interests of the majority of Americans.