M E M O R A N D U M
TO: Reporters and Editors
RE: Obama administration backtracks on student loan announcement
DA: Tuesday, January 10, 2012
Last year, Senator Grassley asked President Obama for clarification on the legal authority to implement the components of the President’s announcement that he was taking unilateral action to reduce select borrower’s student loan obligations. Click here
for Senator Grassley’s letter. The inquiry was based on the implication in the President’s comments that he intended to go beyond the laws passed by Congress.
The subsequent response from the Secretary of Education indicated that, while the White House announcement had referred to changes to the Income Based Repayment (IBR) plan that go beyond a law passed by Congress in 2010, the Department of Education was actually beginning the process to change the regulations governing the Income Contingent Repayment (ICR) plan, an older program with a more flexible authorizing statute that gives greater discretion to the Secretary of Education. Moreover, while the White House’s October announcement stated that this was part of a “series of executive actions” he was implementing and provided specific details about how the initiative would work, the Secretary of Education’s response to Senator Grassley explained that the Department of Education was actually initiating a negotiated rulemaking process by which various stakeholders will meet to negotiate the final details of the new regulations. Click here
to read Secretary Duncan’s letter. In other words, the President’s announcement is just an initial proposal and the actual details have yet to be determined.
Here’s a comment from Senator Grassley about this revelation:
“I am glad to know that the Department of Education may not be flagrantly ignoring the law after all as President Obama’s announcement initially implied. However, the misinformation in the White House announcement that erroneously steers interested students to the IBR plan is still a potential source of confusion for students and financial aid advisors. I hope the White House will issue a correction. I also continue to have concerns about the potential costs of this initiative given the Secretary’s refusal to answer my detailed questions about how the Administration’s cost estimate was calculated.”
For additional background, the October 25, 2011, press release issued by the White House cited the fact that, “Current law allows borrowers to limit their loan payments to 15 percent of their discretionary income and forgives all remaining debt after 25 years” and gives a website for more information about the Income Based Repayment (IBR) plan before going on to point out that, “…Congress enacted, a plan to further ease student loan debt payment by lowering the IBR loan payment to 10 percent of income, and the forgiveness timeline to 20 years. This change is set to go into effect for all new borrowers after 2014—mostly impacting future college students.” The White House announcement
then states, “Today, the Administration is proposing to offer even more immediate relief to many current college students by giving them the chance to limit loan payments to 10 percent of their discretionary income starting in 2012.” Or, as the President said at the University of Colorado the following day, “So today, I’m here to announce that we’re going to speed things up. We’re going to make these changes work for students who are in college right now.”