PolitiFact: Bill Clinton gives Mostly True summary of student loan law

Published Sept. 11, 2012

The statement

Says President Barack Obama "gives students the right to repay (federal) loans as a clear, fixed, low percentage of their income for up to 20 years."

Bill Clinton, in a speech at the Democratic National Convention

The ruling

Former President Bill Clinton got down into details in his speech to nominate President Barack Obama for a second term, telling delegates there was an Obama policy they needed to share with "every voter."

Health care? Jobs? No — changes to student loans.

Student loan legislation under Obama, he said, "lowers the cost of federal student loans."

"And even more important," he told them, "it gives students the right to repay those loans as a clear, fixed, low percentage of their income for up to 20 years."

The president signed student loan legislation in March 2010.

Previously, the government had paid private banks fees to provide federal loans to college students. The new law got rid of the middlemen, freeing up $68 billion over 11 years for Pell Grants and other programs.

It also changed loan repayment terms.

The government already had in place an "income-based repayment plan" that let students cap payments at 15 percent of their income above living expenses, and forgave remaining debt if they made those payments for 25 years. Under the new law, payments dropped to 10 percent, with debt forgiven after 20 years, or half that long for some public service workers such as teachers.

The changes apply to new borrowers as of 2008 and haven't kicked in yet, though they will by early next year, said Jason Delisle, an education budget expert at the New America Foundation who worked on the Republican staff of the U.S. Senate Budget Committee.

Now, while "10 percent" may seem to fit the bill for a clear, fixed, low portion of income, the repayment plan is actually a little more complicated than that — mostly in borrowers' favor. That's because the plan lets borrowers deduct 150 percent of the federal poverty threshold from their incomes before calculating the 10 percent payment.

So, the rate for borrowers making less than $100,000 annually with a household size of one is actually less than 5 percent of total income, Delisle calculated, while it's nearly 9 percent for higher income households.

The payments are adjusted each year based on borrowers' income and family size, requiring annual documentation — not as simple as Clinton made it sound. And borrowers may have to pay taxes on the amount of their debt canceled or forgiven.

We rate this claim Mostly True.

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