Obama offers help for student borrowers
Willie Grace | 3/10/2015, 5:33 p.m.
NEW YORK (CNNMoney) -- President Obama unveiled new steps Tuesday designed to help students avoid the pitfalls of excessive student debt.
The aim is to ensure that students can afford to go to college and will be able to repay their loans once they graduate.
"I believe, as you believe, that higher education is one of the best investments that anyone can make in their future," Obama told students at Georgia Tech in Atlanta. "And it's one of best investments you can make in your country's future."
The president signed a memorandum directing the Department of Education to develop a new system for students to file a complaint when there's a problem with their loans.
This will give students "a way to ask questions about their loans, file a complaint, cut through bureaucracy and get faster response," said Obama.
The DOE and the contractors it uses to service billions of dollars in federal student loans will also be held to higher standards.
They will be required to do more to alert borrowers when they fall behind on a payment or when the contractor managing the loan changes.
In addition, payments must be put towards loans with highest interest rates first, so that more expensive loans are paid off faster, unless a borrower says otherwise.
"The businesses that service your loans will be clear about what your options are," said Obama.
The administration will ensure that debt collectors do not charge student borrowers excessive fees and help them get back on track when a loan is past due. It will also clarify how student debt is treated in bankruptcy court and will work with the Treasury Department to help students with income-based repayment plans.
Obama is also calling on government agencies to analyze student debt trends and propose regulatory changes.
It's part of what Obama calls a Student Aid Bill of Rights, a set of priorities that he says will help ensure that all Americans have access to affordable and high-quality education. The steps are relatively modest since the president has limited power to overhaul student loan policy without the help of Congress.
"It's not a fancy new program. It doesn't have a complicated acronym," said Obama. "It's a declaration of values."
Obama has also proposed more sweeping measures, like making the first two years of community college free for students that maintain a certain grade point average. He also raised the maximum Pell Grant award by nearly $1,000 to $5,730 a year and created a new tax credit to help families pay for college.
Student debt is one of the biggest economic problems facing the country today.
Higher education is considered the key to a successful career, but many graduates end up struggling to get by because much of their extra income goes to pay down student loans. This can impact their ability to buy a home, start a family and save for retirement.
The White House says 70% of those who earn a bachelor's degree graduate with an average debt load of $28,400 at public and non-profit colleges. Overall, more than 40 million Americans have student loans.
"I believe America is not a place where higher education is a privilege for the few," said Obama. "It should be available for anyone who is willing to strive for it -- to work for it."
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