Washington, D.C. - Today, Congressman John Garamendi (D-Fairfield, CA), a former University of California Regent and California State University Trustee who represents the UC Davis community in Congress, praised President Obama's decision to ease the crushing burden of college loan debt for five million student borrowers.
Under the President's plan, being drafted by the Department of Education with a planned implementation by December 2015, an estimated five million borrowers with federal student loans will be able to cap their monthly payments at just 10 percent of their income.
"No one should be priced out of an education. Student loan debt is out of control in America. It's preventing students with loans from taking the entrepreneurial risks that jumpstart economies, stopping students from taking public service jobs, and causing many students to think twice before enrolling in the college education that could forever improve life for them and their families," Garamendi said.
Garamendi added, "In 2010, I was proud to vote for a substantial student loan reform that created a fairer system for new borrowers. It cut out the for-profit middlemen and capped yearly student loan payments at 10 percent of one's income. It was an important step, but people who already had loans were not included in that reform. I'm glad the President is taking this step, helping five million more borrowers finally escape the crippling burden of student loan debt."
Congressman Garamendi is also a cosponsor of H.R. 4582, the Bank on Students Emergency Refinancing Act, which would help 25 million borrowers nationwide refinance their existing federal and private student loans to lower interest rates, similar to those that are currently available to new student loan borrowers. In total, American families would save around $55 billion under the legislation, which they can then reinvest in their local economy.
Specifically, a recent analysis of the Bank on Students Emergency Refinancing Act by the Congressional Research Service shows that a middle-class undergraduate student borrower with an average loan debt would save more than $4,000 over the life of his or her loan. A typical graduate student would save more than $2,500, and parents who borrowed to pay for their child's education would save more than $3,500. President Obama spoke favorably about this legislation in his remarks today.
The President's plan is a furtherance of the college loan reform that Congress passed in 2010, legislation that was strongly supported by Congressman Garamendi. That reform ensured that all recipients of new federal college loans could cap their repayment at 10 percent of their income, with outstanding balances forgiven after 20 years of payment or 10 years of payment for those working in public service jobs like teaching and nursing.
However, the student loan reform did not extend to loans issued before the law. Today's action paves the way for older student loans to be grandfathered into a system more favorable toward students in debt.
Over the past three decades, the average tuition at public four-year colleges has more than tripled, while family incomes have remained stagnant. 71 percent of those earning a bachelor's degree graduate with debt, which averages $29,400.
Under the President's proposal, a 2009 graduate earning about $39,000 a year as a fourth year teacher, with student loan debt of $26,500, would have his or her initial monthly payments reduced by $126 a month, an annual reduction in loan payments of more than $1,500.