Obama showing more heart on the student loan debt issue.

According to the Times and the Law Office of Adam Minsky, an executive order modifying terms of current outstanding loans will be issued later today, effective December 2015.

I used to post about this issue on Motley Fool, about 15 years ago, that the terms of these loans were nothing like what the “hippie” student borrowers got during the 1960s and ’70s. When Occupy Wall Street kicked in, I correctly identified that youth indebtedness was one of the key motivators of the movement; and, in fact, it’s one of the main issues to linger after the demonstrations wound down.

Putting everyone on a 10% discretionary income, 20-year payback, not just “new borrowers”, makes the program more fair, even though it falls short of the Hansen Clarke proposal, which has been re-introduced into the current Dead Congress of 2013-2014/

More later.

[Update 6/10/14: If you saw the conference yesterday, you saw that the President signed an executive order to allow the Pay As You Earn (PAYE) program to be expanded to all current borrowers. PAYE is short-hand for Direct Loan repayment terms of 10% of discretionary income, over a period of 20 years. Right now, PAYE is only available to current students—ones who borrowed after 2011, and had no outstanding loans as of 2007. The executive order allows student loan borrowers from 2007 and before to get the same 10%, 20 year max terms. Up to now, these borrowers could only receive Income Based Repayment (IBR) terms, which is 15% of discretionary income over 25 years (Ridiculous, huh? When you consider that college was virtually free in America up until the 1970s.)

As Thom Hartmann says, student loans are like a giant vacuum sucking the life out of our economy. The student loan debt overhang means that this same money is not being used to buy big ticket items, and stimulate the kind of demand that comes with establishing households. I saw how this kind of thing was already happening in the 1980s and 1990s, and apparently now it’s noticeable enough to affect the national statistics.

PAYE is not the ultimate solution, but it brings the student loan problem closer to a resolution that represents generational fairness. The people griping about these are among the same ones who received highly discounted tuition, whether or not they had (very small) loans or “paid it all themselves!!”

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