Sense & Centsibility Blog

Student Loan Debt Relief May be on the Horizon

College graduate with large tuition bill, horizontalAlthough it’s a challenge to find the time, I like to stay on top of any rule changes by the Department of Education as well as moves by Congress regarding student loans. Since Congress can’t seem to agree on much these days, I wasn’t really surprised to learn that President Obama recently signed an executive order providing needed relief to student loan borrowers. Although this won’t be effective until December 31, 2015, more time is needed for the Department of Education to adopt rule changes to set forth how the loan process will be improved. Meanwhile, Obama has called on Congress to embrace this movement since crushing student loan debt is not only bad for borrowers, but for a robust American economy as well.


1. Capping Payment Amounts: According to student loan expert Heather Jarvis (you can find her amazing website at, the first action taken by Obama is to give more borrowers an opportunity to make payments at 10% of their discretionary income. Many Americans already benefit from this repayment program known as Pay As You Earn (PAYE). Capping payments at this level allows borrowers to follow “the dreams that inspired them to go to school in the first place.” And Obama believes lower student loan payments will lead to borrowers starting their own businesses, and pursuing careers such as teaching, nursing, and social work which are essential for a healthy nation. 2. Requiring more help from loan servicers: The next step (and believe me this is HUGE) is to renegotiate contracts with private companies that service student loans such as Sallie Mae. Student loan counselors here at LSS speak to borrowers all the time who lament the problems they encounter with their servicers such as inaccurate information, inability or refusal to explain repayment options, and just plain rudeness. Obama wants to “make it clear that these companies are in the business of helping students” not just collecting payments from borrowers. He wants to see new contracts that require better customer service, support, and some financial flexibility for borrowers. 3. Educating Borrowers, Trade Associations, and the Public The final piece of the President’s plan is to educate borrowers about all the student loan repayment options available so they can choose the plan that best fits their personal financial circumstances. The idea is to inform trade associations such as teachers and nursing associations, business groups, non-profit companies, the YMCA, tax preparers, and others to help spread the word to borrowers.


But Obama also believes his actions are not enough to solve the student loan crisis. One solution is to authorize students to refinance their loans at lower interest rates just like their parents can refinance an expensive mortgage. This very bill (authored by Elizabeth Warren, a genuine hero for American consumers) was defeated this week in Congress by the Republican majority. The funding needed to pay for the legislation would have been generated by “closing loopholes that allow some millionaires to pay a lower tax rate than middle-class families.” I’m all for every American paying their fair share! Here at LSS, we constantly see how student loan debt affects families’ financial health and stability. More and more families are forced to live on far less just to pay their student loans. And dreams like owning a home or sending their children to college seem unreachable. If you’re struggling with your student loans or finances in general, remember we’re here to help and it’s our pleasure and passion to do so. Give us a call at 888.577.2777 or visit our website at to learn more. Author Barbara Miller is a certified financial counselor at LSS Financial Counseling. She specializes in Bankruptcy Education, Student Loan Counseling and blogging. Have questions? We would LOVE to hear from you. Email us at or leave a comment below. [maxbutton id="1"]