Obama Wants To Make Student Loans Easier To Understand

Mar 12, 2015 12:42 AM EDT

(Photo : REUTERS/Larry Downing ) U.S. President Barack Obama's hand is grabbed by students after he spoke about the rising costs of student loans while in Carmichael Arena at the University of North Carolina at Chapel Hill April 24, 2012.

United States President Barack Obama has directed the Department of Education to create a system that will enable students to easily understand and manage ways to pay back their loans.

Obama wants the system in place by July 1, 2016, in response to complaints from student borrowers about lenders, service agents and collection agencies.

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In a speech infront of students in Georgia Tech on Tuesday, the President said he wants the loan repayment schemes to be clearer so the students do not get lost and confused in the process.

He told crowd of 9,500 students, "We're going to require that the businesses that your loans provide clear information about how much you owe, what your options are for repaying it, and if you are falling behind, help you get back in good standing, with reasonable fees on a reasonable timeline."

The audience cheered as soon as Obama announced this.

He added, "We're going to take a hard look at whether we need new laws to strengthen protections for all borrowers, wherever you get your loans from."

The President has ordered the Treasury and the Education Departments, and the Consumer Financial Protection Bureau to study whether or not bankruptcy laws or other laws and regulations must be amended to include student loans.

Obama wants the feedback of the two departments by October 1.

The lending industry is opposed to relaxing bankruptcy standards for student loans. But advocates say students who are saddled with loans should be able to use these standards to be able to fulfill their obligations.

Based on the White House' estimate, around 40 million American students have availed of student loans.

Over 70 percent of American students who finish a bachelor's degree will usually leave the university with an average debt of about US$28,400.

The White House now wants lending companies to be more transparent, to make borrowers aware of who is servicing their loan, how to arrange their monthly payments and how they could adjust repayment schemes.

TagsBarack Obama, student loan, U.S.