March 11, 2010

Obama's 2011 Budget: Proposed Student Loan Reforms

President Obama recently presented his proposed 2011 budget to Congress. The new budget assumes there will be a complete move to Direct Lending beginning July 1, 2010. In his Jan. 27, 2010 State of the Union address, the President urged the Senate to adopt the House-passed Student Aid and Fiscal Responsibility Act (SAFRA). In the event SAFRA or other student loan legislation is passed, OGSLP's mission is to continue to provide advocacy services including college outreach, financial literacy and default prevention to Oklahoma schools and borrowers. "We look forward to continued and expanded collaboration. Through our work with campus and community partners, we are making a difference in Oklahoma," says Rick Edington, Interim Executive Director.

Difficult economic times led the President to propose an enhancement to the current income-based repayment option. The proposal seeks to lower the calculated income-based payment amounts from 15 percent of discretionary income to 10 percent. In addition, the President would like the loans to be forgiven after 20 years, or 10 years for borrowers working in public service. This is a reduction from the current 25-year forgiveness period for those borrowers not in public service.

Regarding Perkins loans, the President proposes increased funding of $6 billion; however, he requested revisions to the program including the cessation of interest subsidies.

We’ll continue to monitor the progress of student loan legislation and keep you informed of new developments. Please visit our Legislation Page for more information. Have questions? Give us a call!