The Obama administration is set to announce relaxations in student loan repayments on Wednesday, a third in a series of executive orders issued as part of the “we can’t wait” campaign to boost the economy without the help of Congress.
The amount of student loan debt Americans hold surpasses credit card debt, a fact that drove Congress to act in 2007 and create a “pay as you earn” program that allows former students to repay loans at a rate equal to 15 percent of their income. The new measure lowers that to 10 percent, but it is unclear whether the effort will be effective. The White House reports that only 450,000 students—out of an estimated 36 million borrowers—took advantage of the 2007 rule.
The problem here is that Obama can only relax repayment schedules for 'direct' loans, where the federal government loaned the money directly to students. Until last year, most loans came from the private sector, guaranteed by the federal government but still managed by the private lenders. Obama and a Democratic Congress eliminated the guarantees in their “reform” of the student-loan industry, a reform that wipes out the “industry” entirely and forces students to deal directly with government instead. Without getting Congress involved, Obama can’t do anything about the private-sector loans.