DENVER (AP) — President Barack Obama recalled his
struggles with student loan debt as he unveiled a plan Wednesday that could
give millions of young people some relief on their payments.
Speaking at the University of Colorado Denver,
Obama said that he and his wife, Michelle, together owed more than $120,000 in
law school debt that took nearly a decade to pay off. He said that sometimes
he'd have to make monthly payments to multiple lenders, and the debt meant they
were not only paying for their own degrees but saving for their daughters'
college funds simultaneously.
"I've been in your shoes. We did not come from
a wealthy family," Obama said to cheers.
Obama said it's never been more important to get a
college education, but it's also never been more expensive. Obama said his plan
will help not just individuals, but the nation, because graduates will have
more money to spend on things like buying homes.
"Our economy needs it right now and your
future could use a boost right now," Obama said.
Obama's plan will accelerate a measure passed by
Congress that reduces the maximum required payment on student loans from 15
percent of discretionary income annually to 10 percent. He will put it into
effect in 2012, instead of 2014. In addition, the White House says the
remaining debt would be forgiven after 20 years, instead of 25. About 1.6
million borrowers could be affected.
He will also allow borrowers who have a loan from
the Federal Family Education Loan Program and a direct loan from the government
to consolidate them into one. The consolidated loan would carry an interest
rate of up to a half percentage point less than before. This could affect 5.8
million borrowers.
Student loans are the No. 2 source of household
debt. The president's announcement came on the same day as a new report on
tuition costs from the College Board. It showed that average in-state tuition
and fees at four-year public colleges rose $631 this fall, or 8.3 percent,
compared with a year ago. Nationally, the cost of a full credit load has passed
$8,000, an all-time high.
Student loan debt is a common concern voiced by
Occupy Wall Street protesters. Obama's plan could help him shore up re-election
support among young voters, an important voting bloc in his 2008 election. But,
it might not ease all their fears.
Anna Van Pelt, 24, a graduate student in public
health at the University of Colorado Denver who attended the speech, estimates
she'll graduate with $40,000 in loans. She called Obama's plan a "really
big deal" for her, but said she still worries about how she'll make the
payments.
"By the time I graduate, my interest rate is
going to be astronomical, especially when you don't have a job," Van Pelt
said. "So it's not just paying the loans back. It's paying the loans back
without a job."
The White House said the changes will carry no additional
costs to taxpayers.
Sen. Mike Enzi, R-Wyo., his party's ranking member
on the Senate Health, Education, Labor and Pensions Committee, said in a
statement that while he supports efforts to help struggling graduates, the
president's plan was crafted behind closed doors and "we are left with
more questions than answers."
Last year, Congress passed a law that lowered the
repayment cap and moved student loans to direct lending by eliminating banks as
the middlemen. Before that, borrowers could get loans directly from the
government or from the Federal Family Education Loan Program; the latter were
issued by private lenders but basically insured by the government. The law was
passed along with the health care overhaul with the anticipation that it could save
about $60 billion over a decade.
The change in the law was opposed by many
Republicans. At a hearing Tuesday, Rep. Virginia Foxx, R-N.C., who chairs a
subcommittee with oversight over higher education, said it had resulted in
poorer customer service for borrowers. And Senate Republicans issued a news
release with a compilation of headlines that showed thousands of workers in
student lending, including those from Sallie Mae Inc., had been laid off
because of the change.
Today, there are 23 million borrowers with $490
billion in loans under the Federal Family Education Loan Program. Last year,
the Education Department made $102.2 billion in direct loans to 11.5 million
recipients.
Hefling reported from Washington. Associated Press
writer Kristen Wyatt contributed to this report.
Copyright
2011 The Associated Press.
(AP
Photo/Jacquelyn Martin)
