The presidential Pen and Phone strike again – this time, to help college graduates get ahead, or at least back to even.
In the latest countermeasure to Congressional Republicans blocking his agenda, President Obama signed an executive order to lift the student-loan burden from about 5 million people, capping the debt repayments at ten percent of the borrower’s income.
The move is intended to eliminate one of the biggest drivers of personal bankruptcies and a drag on a sluggish economy.
In a brief White House ceremony, the president – flanked by several young people grappling with student loan debt as high as six figures – used the occasion to call out GOP hypocrisy when it comes to doling out financial breaks to the truly needy. The order, he said, will be paid for by closing personal and corporate tax loopholes backed by Republicans.
“It would be scandalous if we allowed those kinds of tax loopholes for the very, very fortunate to survive while students are having trouble just getting started in their lives,” the president said at the White House ceremony Tuesday. “If you’re a big oil company they’ll go to bat for you. If you’re a student, good luck.’
“Some of these Republicans in Congress seem to believe that just because some of the young people behind me need some help, that they’re not trying hard enough,” he said.
He’ll follow up on the order with a Q-and-A session on Tumblr tomorrow.
The order directs Education Secretary Arne Duncan to amend the department’s student-loan regulation for the payment ceiling. The White House wants the amendments to be enacted for borrowers by December 2015.
Though the executive order circumvents Congress, Obama has at least one Capitol Hill ally in this fight: Senator Elizabeth Warren, a Massachusetts Democrat and architect of the Consumer Financial Protection Bureau.
Warren, a long-time consumer-rights champion and hero of progressives, is sponsoring a bill that would help student borrowers refinance their loans. Obama – who tapped Warren to set up the CFPB during his first term – endorsed the bill during the ceremony and alluded to it in his weekly national address.
White House aides say the president’s executive order will allow an additional 5 million borrowers with federal student loans to cap their monthly payments at 10 percent of their income. It also helps make college more affordable at a time when more jobs require a diploma just to get an interview.
Since the 1980s, the average tuition at a public four-year college has more than tripled, but family incomes are stagnant, according to a White House fact sheet. More students than ever are relying on loans to pay for college: 71 percent of undergraduates leave school an average of $29,400 in debt, starting their careers with payments that can eat up as much as a rent or mortgage payment.
While the executive order – and tag-teaming with Warren on a companion bill, due for a procedural vote this week – can have a financial impact on students, it also has political ramifications that perhaps Obama hopes can begin to reverse his underwater poll ratings.
By flexing some presidential muscle, Obama is pressuring Congress to pass this White House agenda item, signalling that his pen-and-phone strategy will continue to be an option, and hopefully expose GOP lawmakers as obstructionist.