WASHINGTON -- President Barack Obama on Monday will take executive actions to ease the burden of college loan debt for potentially millions of Americans, in a White House event coinciding with Senate Democrats' plans for legislation to address a concern of many voters in this midterm election year.
Before an East Room audience, Mr. Obama is scheduled to announce "new steps to further lift the burden of crushing student loan debt," said a White House official, who declined to be identified describing the actions in advance of the president's event. Despite past actions by the administration, borrowers' debt load is growing and retarding the ability to buy homes, start businesses or otherwise spend to spur the economy, economists say.
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 5 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.
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.
The president said in January, in his State of the Union address, that he would use his "pen and phone" to take executive actions and enlist private institutions on matters when disputes with congressional Republicans block legislation.
But legislation generally is more far-reaching, so Mr. Obama will also urge passage of a measure that the Democratic-led Senate plans to take up this week. He plans to discuss the proposal at his Monday event and in a Tuesday question-and-answer session about student loan debt on Tumblr, the social-networking website.
The Senate bill would allow an estimated 25 million Americans to refinance outstanding student loans, federal and private, at lower interest rates. Reduced interest payments would cost the government about $58 billion over 10 years, according to the Congressional Budget Office, but the legislation would raise $72 billion by imposing a new tax on some high-income individuals.
Because of the tax and the bill's overall cost, it is unclear whether Democrats can muster enough Republican support to get the 60 votes needed. Even if they succeed, the Republican-controlled House is likely to ignore the measure.
About $1 trillion in federal student loans or loan guarantees is outstanding, on top of more than $100 billion in outstanding private student loans that are not federally guaranteed, the Congressional Budget Office reported. Average tuition at four-year public colleges has more than tripled over the past three decades, according to the administration, and 71 percent of those who graduated with a bachelor's degree carried debt, which averaged $29,400.