From Bloomberg: Obama to Sign Order to Ease Student Loan Payments

Student loan debt has exploded in recent years.

A divided Congress (Republican controlled House / Democratic controlled Senate) rarely works with the president anymore.

Existing legislation is flexible enough to allow for executive action.

All these combined have led to a decision by the president to issue an executive order "to expand the number of people who can take advantage of a law capping payments on federal direct loans to no more than 10 percent of their monthly incomes."
- Click here for the article.

The action marks the latest effort by Obama’s administration to advance policies by executive action after being stymied on Capitol Hill. With the help of several cabinet heads, the president has spent much of this year initiating modest changes in programs that may provide a boost to Democrats in advance of the midterm elections.

Obama’s action tomorrow will expand a 2010 law that tied payments to income, according to the White House official, who said an additional 5 million people who took out loans before October 2007 or haven’t borrowed since 2011 will be eligible.

The proposal aligns with a bill from Senate Democrats that would allow individuals to refinance their student loan debt at current rates. Democrats have argued that the $1.2 trillion worth of outstanding student-loan debt retards economic growth as young college graduates are forced to postpone home buying or other purchases.

2305 students will likely be tested on executive orders - and other mechanisms available to the president to accomplish objectives over the objection of Congress. Critics argue that these are unconstitutional ways to overcome the checks and balances, supporters argue they are essential tools for implementing the law.

In addition to class notes, click here for background on executive orders:

- Wikipedia: Executive Order.
- Congressional Research Center: Executive Orders: Issuance and Revocation.
- Wikipedia: Lists of executive orders.

And since student debt has exploded in recent years, the subject has risen as a public policy issue - an example of agenda setting. Here are links with detail about the subject:

- The Project on Student Debt.
- Federal Reserve Bank of New York: Student Loan Debt by Age Group.

The increased student loan burden has an impact on career choices?

Increased debt is out of sync with starting salaries in many fields. Some may not seek to enter certain careers because they will not allow them to pay off theirs loans.

From the Fiscal Times, federal legislation has been introduced making it more feasible for students to pursue low paying fields, like teaching.

New federal legislation is making it easier for those in lower-paying jobs to pay off their school debt, says Edie Irons, communications director for the Institute for College Access and Success, Oakland, Calif. Income-based repayment, which became available in 2009, allows those with federal student loans to cap monthly payments at a percentage of discretionary income.  After 25 years, any outstanding debt is forgiven.

For those who choose public service jobs like school guidance counselor or public defender or non-profit health care, a separate program offers federal loan forgiveness after only 10-years.  “This is a very important program for the people who qualify for it, especially if they have gone to graduate school and taken on a lot of debt to become a social worker or a teacher,” Irons says.

Aware that debt worries are keeping some students away from lower-paying professions, Scripps College in Claremont, Calif. has taken steps to limit loan amounts in its financial aid packages. It has put an annual $3,500 cap on lending, limiting students to $14,000 over their undergraduate careers. “We were concerned that students were mortgaging their futures to get college degrees, and we didn’t want that to happen,” says David Levy, director of financial aid. “We wanted students to be able to follow their passions.”

ROI
ROI

About the Student Loan Provisions in the Health Care Bill

Here's background on the student loan bill tacked onto the health bill and later removed in the Senate.