Fox Business News Interviews Gentile after President Obama Announces New Student Loan Initiative
President Obama signed an executive order yesterday to expand the2010 Pay as You Earn program that caps some college graduate's student loan payments at 10% of their monthly discretionary income. It increases eligibility in the program to include those who took out loans before 2007 or stopped borrowing by October 2011. It is expected that the new guidelines will make it possible for an additional five million people to participate in this program.
Obama also announced he is directing the government to renegotiate contracts with federal student loan servicers to encourage them to make it easier for borrowers to avoid defaulting on their loans. And he asked Treasury and Education departments to work with major tax preparers to increase awareness about tuition tax credits and flexible repayment options available to borrowers.
The President's plan is one of many that have been considered as the nation looks to address the ever increasing problem of huge student debt loads. One particular approach was cited by League President Paul Gentile in Fox Business News coverage of the executive order yesterday. In that report, entitled "Obama Announced Student Loan Changes --What it Means for Borrowers," Gentile said the government should provide a more effective structure to allow private lenders to consolidate federal students at attractive rates. "We would be able to give a lower rate and extend the terms. People should be allowed to lower their interest rates and pay less over a longer term," he says. He notes that given most careers take 3-5 years to see compensation progression, the early years of student loan debt need more flexibility. Credit unions have restrictions on length of term and could benefit from more flexibility. "We don't think twice about a 30-year mortgage, why not with our education?