June 9, 2014—APLU President Peter McPherson today released the following statement regarding President Obama‘s new efforts to ease student debt and a Senate bill that would allow for the reduction of rates on existing loans.
“We appreciate President Obama’s move to expand the student loan program that caps repayment levels at 10 percent of a borrower’s monthly income so that it covers borrowers with older loans in addition to new ones. The program should help prevent many student loans from becoming too financially burdensome for borrowers, thereby allowing them to more fully participate in the economy and society. The provisions announced today should also help reduce delinquencies and defaults and are welcome developments.
“The federal student loan program is important for both individuals and the country since an educated population is vital to our long-term economic growth and success. An education and degree from a public university provides particular value to the student in terms of quality and cost. However, substantial cuts in state funding to public universities over many years have forced institutions to increase tuition to cover the cost of educating students. Allowing students to pay back their loans in accordance with their income is a practical way to help students manage the financial consequences of inadequate state funding.
“The bill recently introduced in the U.S. Senate to permit the refinancing of older loans at current, lower rates is also worthy of support since it would reduce monthly payments for those with older loans.
“In addition to reducing loan payments for students, APLU urges the White House and Congress to focus on strengthening federal aid institutional eligibility provisions to help prevent students from taking out loans and paying tuition to schools that do a poor job of educating and graduating their students. APLU proposed an alternative to President Obama’s ratings plan that would better identify these poorly performing institutions and start reducing the amount of federal aid they’d be eligible to receive; ultimately cutting off all aid if they don’t improve.”