Obama signs executive order capping student loan payments

WASHINGTON - In an attempt to further ease heavy college debt, President Obama on Monday signed an executive order allowing millions of student-loan borrowers to cap their payments at 10 percent of their monthly income.

Flanked by students and recent graduates who borrowed money to go to school, Obama said the cost of college and burden of student debt are suffocating middle-class families and putting students at an economic disadvantage before they enter the workforce.

"We are here today because we believe that in America, no hardworking young person should be priced out of a higher education," Obama said.

Most student-loan borrowers already have the option to limit payments to 10 percent of their income under recent legislation and regulations. Obama's order extended that option to about five million others who were not covered by the previous changes, including those who took out loans before October 2007.

"The past couple of years, we've done future students, we've done current students, and now we're trying to take a step back," Secretary of Education Arne Duncan told reporters Monday.

Duncan said the expansion of the payment caps will be "fantastic for the economy" by allowing young people to spend or invest that money elsewhere. But officials said the new regulations are not likely to be implemented until December 2015 at the earliest.

Student-loan debt now tops $1.2 trillion. Obama has publicly endorsed legislation sponsored by Sen. Elizabeth Warren (D., Mass.) that would allow students to refinance both public and private loans at lower interest rates. It would be paid for by closing a tax loophole available to the wealthy.

Obama lashed out at congressional Republicans for opposing the Warren legislation and for voting to cut federal Pell Grants, saying they were more apt to support wealthy individuals and companies than middle-class students working hard to get an education.

"If you're a big oil company, they'll go to bat for you," Obama said. "If you're a student, good luck."