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POLITICS: PennAve

Obama proposed big reforms to rein in loan costs in 2015 budget

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Politics,White House,Congress,Education,Susan Ferrechio,Barack Obama,PennAve,Student Loans,Budgets and Deficits,College Tuition

President Obama's expansion of the federal student loan forgiveness program used executive authority to force through an idea already included in his 2015 budget proposal.

But the move so far excludes major reforms to the federal loan program that the administration had proposed in their budget plan alongside the expansion.

When he announced the expanded program, which will allow all federal loan holders to cap their monthly payments at 10 percent of adjusted gross income and enjoy debt forgiveness after 10 years of public sector work or 20 years in the private sector, Obama didn’t mention the proposal in his own budget to cap loan forgiveness at $57,000.

Obama also never mentioned a budget proposal that would require anyone who borrows more than $57,000 to wait 25 years, not 20, for loan forgiveness.

“We’ve got some indication from the White House that they are interested in making these changes,” said Jason Delisle, director of the Federal Education Budget Project for the New America Foundation, a nonpartisan think tank.

The foundation worked closely last year with the administration to develop the reforms, which Delisle said are necessary to keep the plan fair and cost effective.

Another reform proposal in the Obama budget plan includes removing the cap on monthly payments so that those who start earning more would have to pay higher monthly rates within the 10- or 20-year window.

And it would require married couples to report a combined income if they are participating in the program, which will prevent people from hiding income used to determine monthly loan payments.

White House and congressional budget officials estimated it would cost the government $7 billion to $9 billion to expand the program, but only if the reforms are implemented.

There is, so far, no cost estimate of expanding the program without the changes.

With his budget unlikely to ever pass Congress, Obama could sign some of the reforms into law through executive order, Delisle said.

The White House said they have made no final decisions, but they can’t implement a cap without congressional action.

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Susan Ferrechio

Chief Congressional Correspondent
The Washington Examiner