Altogether, the value of every outstanding federal student loan and loan guarantee is around $1.2 trillion. That is a staggering number, and many economists say that debt is becoming a drag on the overall economy.
President Obama is expected to take steps toward, as the White House puts it, “reducing the burden of student loan debt.”
It is no secret many young Americans – especially recent graduates – are having a tough time. According to Kevin Carey, who directs the New America Foundation’s Education Policy Program, they are having trouble “trying to get jobs in a still-weak economy, and having to make bigger loan payments at the same time.”
The president will direct the Department of Education to work more closely with the companies that service federal loans, and he wants to make more borrowers eligible for something called an “income-based repayment plan,” in which payments are capped at 10 percent of what a borrower makes.
“It could be a very big deal, depending on the number of people who use it,” Carey says.
According to Sandy Baum, a senior fellow with the Urban Institute, that has been a big obstacle so far.
“Lots of people who are eligible for income-based repayment don’t participate in it,” she notes, adding that many aren’t aware the program exists.
There is, of course, only so much the president can do without help from lawmakers. Sen. Elizabeth Warren (D-Mass.) has drafted a bill that would allow borrowers to refinance their student loans, but the Congressional Budget Office estimates that would cost taxpayers about $60 billion over the next decade, which is unpalatable to many Republicans.
Monday, President Obama is expected to ask companies that help borrowers prepare their taxes, including Intuit and H&R Block, to make sure their customers know what tax credits and re-payments plans are out there.