WASHINGTON (CNNMoney) — President Obama announced on Monday an expansion of a program that helps student loan borrowers manage their debt.
Obama will expand the criteria for an alternative repayment program, which caps monthly payments for certain federal student loans at 10% of a borrower’s discretionary income.
The changes would allow an additional 5 million borrowers to qualify and will be available beginning in December 2015, the official said.
The alternative payment programs are designed to help borrowers struggling under the weight of student loans. They include forgiveness programs for on-time payments and public-sector employees. Teachers can have their balance canceled after ten years, for example. Low-income borrowers can have their balance canceled after 20 or 25 years of on-time payments.
Borrowers who don’t quality for forgiveness but use a repayment program find their monthly payments reduced but spread out over a longer period of time. That means they will pay more over the lifetime of the loan, as there is additional time for interest to accrue.
Income-based repayment and Pay As You Earn aren’t available for borrowers who turn to private institutions rather than the government.
Student loans have been in the spotlight as the amount of debt skyrocketed, taking second place to only home mortgage debt, according to the Consumer Financial Protection Bureau.
On Tuesday, Obama is scheduled to discuss student loan debt and other education topics in a chat on the website Tumblr.