In 2015, President Barack Obama signed a memorandum aimed at helping students with their student loans. Known as the “Student Aid Bill of Rights”, the memorandum was a direct order from the President of the United States that demonstrated a commitment to the process of making a postsecondary education more accessible and affordable.
In particular, the Student Aid Bill of Rights gave federal agencies tied to the U.S. Department of Education the power to make obtaining student loans easier, and gave borrowers further assurance that paying back these loans would be less complicated. Additionally, it put student loan lenders at center stage, in order to ensure they were operating legally and honorably.
Historically, the United States has broken a lot of new ground with regards to higher education, and more specifically student loans, since the Department of Education became official in 1979. President Obama’s efforts, however, were likely the single greatest overhaul of a system designed to help Americans go to college and earn their degree.
At the time, President Obama wrote in his executive order, “We can and should do much more to give students affordable ways to meet their responsibilities and repay their loans. Now is the time for stronger protections.”
Due to the former President’s strong response to making sure Americans had access to higher education, plans introduced during his presidency were often referred to as Obama Loan Forgiveness programs. Yet, they all stemmed from the philosophy contained in the Student Aid Bill of Rights, which covered four key areas meant to fix – and in some cases, newly establish – educational opportunities for Americans.
While the official memorandum is extensive, there are four areas in the Student Aid Bill of Rights that are worth focusing on for you as a student and borrower. Below you’ll find more information about each of these four areas and their impact.
As part of the Student Aid Bill of Rights, President Obama unveiled America’s College Promise, which proposed making the first two years of community college free to responsible college students.
This not only made earning the first two years of a bachelor’s degree free to roughly nine million students, it perfectly aligned with the U.S. Department of Education’s First in the World Grants initiative. Through this new initiative, U.S. colleges and universities would be awarded $75 million towards expanding college opportunity, improving student learning and reducing the costs of school.
Beyond these two items, this section included a Call to Action on College Opportunity, which gives primary and secondary educational institutions an improved ability to prepare students for college. Moreover, a college ratings system would be put into place to help students and their families determine which schools offered the best value for their dollar as they sought an education.
The Student Aid Bill of Rights had a tremendous impact on Pell Grants, as President Obama increased the maximum amount a student could be awarded to $5730 in 2015. This gave more than eight million Americans better, more affordable access to college, and included a commitment from the White House to keep maximum Pell Grant awards aligned with the cost of inflation.
Other improvements involved making the process for applying for federal student loans easier – cutting application time from one hour to 20 minutes – along with streamlining and improving education tax benefits for over 25 million families through the American Opportunity Tax Credit (AOTC).
One of the greater benefits proposed as part of the Student Aid Bill of Rights was the launch of an income-driven repayment plan that made student loans more affordable. While the Pay As You Earn (PAYE) program was originally unveiled in 2011, its strict requirements led to a revamping of the program which became the Revised Pay As You Earn (REPAYE) plan.
For nearly five million more borrowers, the REPAYE plan gave them a way to have their monthly student loan payments capped at 10 percent of discretionary income. But the progress didn’t end there, as President Obama later proposed new reforms to the REPAYE program and other income-driven plans that would protect borrowers for years afterward.
Continuing to demonstrate his focus on helping borrowers, President Obama eliminated subsidies that had historically been given to lenders, and facilitated the transition of all new student loan originations to the Direct Loan program. Now, lenders would be obligated to meet certain performance requirements to have a contract with the U.S. Department of Education, which only improved the services provided by these institutions.
Another improvement made by the administration was a borrower outreach program designed to simplify the application process by letting borrowers use the IRS to pull their income information directly from their database. Through email campaigns, social media and company partnerships, the outreach program helped millions of new borrowers sign up for income-driven repayment plans that would help them through school.
Last of all, President Obama’s administration gave the U.S. Department of Education the order to develop innovative tools and resources that encouraged smart financial decisions, a clearer understanding of repaying student loans and the ability to compare plans quickly and easily.
The higher education and student loan reforms that took place during President Obama’s administration have given millions of Americans the ability to attend college and earn a degree. As the world becomes more competitive, these programs offer new opportunities for the U.S. to stay ahead globally, without the added burden of unsustainable student debt.
For more information on how these programs and resources can help you as a student loan borrower, fill out our online form or call (800) 771-6358 to speak with a student loan specialist from our team.