On Monday, President Obama signed an executive order that should grant relief to millions of federal student loan borrowers.
The President signed an order that significantly adjusted an existing 2010 order. The previous order capped repayment at 10% of income for borrowers from October 2007 and on. However, that left roughly 5 million borrowers inelgibile for the income-based cap. The new executive order applies to those who borrowed in 2007 and before, limiting their repayment to 10% of monthly income.
With 71% of undergraduates borrowing for school and with their average debt averaging roughly $29,000 per borrower (and, in some states, above $30,000), this relief is certainly welcome news for the 5 million newly eligible borrowers. Accordingly, this order has received praise from multiple educators, including university presidents.
The plan is expected to cost the government a significant amount of money, likely in the billions. “We actually don’t know the costs yet,” U.S. Secretary of Education Arne Duncan said. “We’ll figure that out on the back end.” Considering that the government currently expects to profit from student loans, the financial impact of this decision may not be overly significant to the government. However, the financial impact will surely be felt among borrowers and their families.