The hefty burden of student debt was eased slightly this week when President Barack Obama issued an executive order that establishes a more realistic timeline for repaying federal loans. That will enable at least 5 million people to cap their student loan payments at 10 percent of their income. This is a welcome move by the executive branch to aid young adults as they settle into the workforce. A more gradual repayment of student loans should help recent graduates whose payments are so large they make it difficult to change jobs, buy homes or start families.
The executive order expands the Pay-as-You-Earn program, which has applied only to loans taken out in the last several years. Now, this sliding scale payment option also will apply to students with loans issued before October 2007 or who have not borrowed since October 2011.
Graduating with significant debt has become nearly unavoidable for most college students. Currently, 71 percent of those earning a bachelor's degree graduate with debt, which averages $29,400. In Florida, the average student loan debt is below the national average, at $22,873. And with a stagnant economy and dim job prospects, the task of repaying student loans becomes more difficult each year.
Obama also announced that the Education Department will renegotiate its contracts with loan providers to provide financial incentives for borrowers who pay their loans on time; cap interest rates at 6 percent for active-duty service members; and work with private loan providers Intuit Inc. and H&R Block to supply information about repayment options to better educate borrowers.
These actions are encouraging, but more can be done to relieve the financial pressures many students face. The Senate, for example, is considering legislation that could help an estimated 25 million Americans refinance outstanding student loans at lower interest rates that would be the same as those available to borrowers taking out federal loans this year.
A college education remains the smartest investment in the future and pays off in higher earnings potential in the long run. But that potential success is diminished if the degree requires taking on so much debt that it limits opportunities for young Americans to pursue careers and invest in their communities for years after they graduate. A more gradual loan repayment schedule and more reasonable interest rates are steps in the right direction.