June 9, 2014 at 6:07 pm

Obama caps student debt payments at 10% of income

Washington — Dubbing it a “no-brainer,” President Barack Obama expanded a program Monday capping monthly student loan payments for 5 million more borrowers at an unknown cost to taxpayers.

Obama also threw his support behind legislation that Democrats are using to paint Republicans as blocking relief for Americans inundated by student debt.

With a group of student loan borrowers looking on, Obama put his pen to a presidential memorandum that will allow those who borrowed through the federal government before 2007 to pay no more than 10 percent of their income in monthly payments. Existing programs created by Congress and Obama already offer that benefit to recent borrowers; Obama’s memo will make it fully retroactive.

“I’m only here because this country gave me a chance through education,” Obama said. “We are here today because we believe that in America, no hard-working young person should be priced out of a higher education.”

In Obama’s 2015 budget request, the White House projected expanding the program would cost $7.6 billion in its first year, although the costs decrease in the out years. But Education Secretary Arne Duncan told reporters Monday that the government hasn’t gotten that far.

“We actually don’t know the costs yet,” Duncan said. “We’ll figure that out on the back end.”

Republican leaders faulted the president for failing to think through the costs of the program, and noted it only affects education financing — not the underlying problem.

“Today’s much-hyped loophole closure does nothing to reduce the cost of pursuing a higher education, or improve access to federal student loans,” said House Speaker John Boehner, R-Ohio.

Obama, joined by Democratic lawmakers at the White House, also formally endorsed a Senate bill that takes aim at the same problem but could have a more profound effect by allowing by allowing borrowers to refinance their student debt at lower rates currently being offered.

The Senate plans to take up the bill this week, but it faces steep opposition among Republicans because it pays for the lower rates by phasing in a new minimum tax on millionaires. Even so, the bill reinforces a broader economic push by Democrats to portray themselves as the sole advocates for the middle class as the midterm elections draw closer.

New borrowers can already cap their monthly payments at 15 percent of income, and that level is set to drop to 10 percent next month. But that plan, created by Congress, doesn’t help those still digging themselves out of student debt they accrued years ago.