The White House has just announced that President Obama will launch a major expansion of a student loan program that helps borrowers manage their debt. He will expand the criteria for a major alternative repayment program, which currently caps monthly payments for student loans at 10% of a borrower’s discretionary income.
The changes are planned to be rolled out on Monday and would allow an additional 5 million borrowers to qualify beginning in December 2015.
These alternative student loan programs are designed to help borrowers who are currently struggling under the weight of student loans. They include forgiveness programs for on-time payments and public-sector employees. Some teachers can even have their balance canceled after ten years, and certain low-income borrowers can have their balance canceled after 20 or 25 years.
Many borrowers who don’t quality for forgiveness have been using repayment programs and finding their monthly payments reduced, while also being spread out over a longer length of time. Depending on the situation, this can sometimes actually cause them to pay more due to the increase in compound interest.
The White House also stated that Obama will voice support for a Democratic proposal on Capitol Hill that would allow borrowers to refinance their student loans. The proposal was made by Sen. Elizabeth Warren and would extend current rates for new borrowers to those with outstanding loans at higher rates.
“While Congress decides what it’s going to do, I will keep doing whatever I can without Congress to help responsible young people pay off their loans — including new action I will take this week,” Obama stated in his weekly address on Saturday.
On Tuesday, Obama is scheduled to discuss student loan debt and other education topics in during a live chat session on the website Tumblr.