President Obama signed an executive order Monday allowing borrowers to cap their student loan payments at 10 percent of their income. U.S. Senator Charles Schumer says the action will help relieve the debt burden for hundreds of thousands of New Yorkers.
“In no year will you have to pay more than 10 percent of your income for student loans. Second, if you work in the public or non-profit sectors after 10 years you don’t owe any more on student loans, they’re gone. If you work in the private sector after 20 years they’re gone, and that will apply to all the people who already have student loans. So, it’s a huge benefit,” said Schumer.
An existing repayment plan lets borrowers pay no more than 10 percent of their monthly income in payments, but is only available for those who started borrowing after October 2007. Schumer says the new action will be available for everyone who has ever taken out student loans.
According to the ‘Project On Student Debt’ the average debt per borrower from the class of 2012 ranged from more than $17,000 to over $33,000. Schumer says he believes it will provide a boost to the housing market and allow young people to invest in their local economy.
“These are young people just starting out. They want to buy a home, they want to buy a car, they want to start a family, but when they have $30,000 or $40,000 of student loans on their back and their often paying 7, 10, 12 percent that makes it real hard and it slows down our whole economy,” said Schumer.
Schumer says Congress will also vote on a bill this week that would let college graduates refinance their existing loans at a lower interest rate of 3.8%. Senate Democrats are pushing that bill, but it faces Republican opposition over how to pay for it.