Ed. note: this post originally appeared on Treasury Notes, the official blog of the US Department of the Treasury
Today, President Obama heads to the University of Nevada Las Vegas to discuss student loans. The President believes in creating an economy built to last that gives every hard working student a fair shot at developing the skills they need to find a good job by attending college, university, community college, or job training programs. To help put the cost of higher education within reach for more Americans, the President has taken action to cap monthly payments on student loans for responsible graduates who make their payments on time. Continuing to act, he will issue a Presidential Memorandum to streamline the process and improve information available to responsible borrowers about student loan repayment options. Answering the President’s call, Treasury and IRS will begin working on improving the application process for responsible borrowers.
The Administration has helped make higher education more affordable by increasing Pell grants by over $900 and signing a tax credit worth up to $10,000 to help middle class families cover the cost of tuition. Additionally, over the past several years, the Administration has worked to improve repayment options available to responsible student loan borrowers. Since 2009, former students have been able to enroll in an “Income Based Repayment” (IBR) plan to cap their student loan payments at 15 percent of their current discretionary income if they make their payments on time and beginning in 2014 this cap will be lowered to 10 percent for borrowers. In October, the President announced a “We Can’t Wait” executive action to make that lower cap available to more borrowers by the end of 2012, which will reduce monthly student loan payments for more than 1.6 million responsible student borrowers.
Despite these opportunities and policy improvements to help graduates make their monthly payments, too many borrowers are still struggling to access this important repayment option due to difficulty in applying. That is why today’s Presidential Memorandum calls for the creation of a streamlined online application process for IBR that allows student loan borrowers with federally held loans to import their IRS tax return income data directly into the IBR application. This process will allow income information to be seamlessly transmitted so that borrowers can complete the application in one sitting. Federal direct student loan borrowers will no longer be required to contact their loan servicer as the first step to apply. Working with the Department of Education and the IRS in the coming months, Treasury will implement these tools to help put the cost of higher education within reach for more Americans. Stay tuned for the launch of this new tool!