This week, President Barack Obama signed an executive order intended to help millions of borrowers struggling with student loans. He also called on Congress to pass a student loan refinancing bill scheduled for a June 11 vote in the Senate. The New York Times editorial board points out that the executive order and the refinancing bill demonstrate how school loans -- now totaling about $1.2 trillion -- have become a major problem that has trapped college graduates and threatens the economy.
The president's executive order could help as many as 5 million Americans by expanding access to the government’s Pay as You Earn program, which allows borrowers to set up affordable payments and qualify for loan forgiveness. Under it, the Department of Education must more strictly evaluate how well servicers of federal loans keep borrowers out of default. The department also must help people in default rehabilitate their records through a program that permits lower payments. The proposed Senate bill, known as the Bank on Students Emergency Loan Refinancing Act, would create a fund to help refinance federal or private student loans at lower interest rates. The bill would be paid for by a new minimum tax on the wealthy.
Although the bill is expected to be opposed by House Republicans, the New York Times editorial board writes that bringing the matter to a vote at all emphasizes the need to take action about the indebtedness of U.S. graduates, some 7 million of whom are in default. The newspaper suggests that Congress revamp the entire student-aid system to prevent vulnerable borrowers from falling too far into debt at all.