President Obama will issue an executive order Monday afternoon that will permit at least 5 million people to cap their student loan payments at 10 percent of their monthly income.
The administration hopes to put the amendment in place by December 2015 while allowing the Department of Education to enact new regulations.
In his weekly address on Saturday, Obama announced that he would act on student loan issues in the following days. His order will expand on a 2010 law that capped borrowers’ repayment but left out people with older loans, such as people who borrowed before October 2007 or stopped borrowing by October 2011.
Federal student loan debt reached over $1 trillion last year.
“This is commencement season, a time for graduates and their families to celebrate one of the greatest achievements of a young person’s life,” Obama said Saturday. “But for many graduates, it also means feeling trapped by a whole lot of student loan debt.”
The Department of Education will also attempt to revise its contract with loan providers to provide financial incentives to borrowers who pay their loans on time. It hopes to cap interest rates for active-duty military members at 6 percent. It is also helping the Department of the Treasury to work with tax prep firms like H&R Block and Intuit to make sure borrowers are aware of repayment options and tax credits for college tuition.
The president is also set to speak about his support for a proposal from Sen. Elizabeth Warren (D-MA) that would allow current borrowers to refinance their student loans at lower interest rates. The refinancing would be paid for by higher taxes on the wealthy.
“That’s the choice your representatives in Congress will make in the coming weeks," Obama said. “Protect young people from crushing debt, or protect tax breaks for millionaires.”