Seeking to shore up support among cash-strapped college graduates and students struggling with rising tuition costs, President Barack Obama is outlining a plan to allow millions of student loan recipients to lower their payments and consolidate their loans.
Outside of mortgages, student loans are the No. 1 source of household debt. Young voters were an important bloc in Obama’s 2008 campaign, and student loan debt is a common concern among Occupy Wall Street protesters.
Obama’s announcement, made Oct. 26 in Denver, came the same day a new report was released by the College Board. It shows 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.
The White House said Obama will use his executive authority to provide student loan relief in two ways.
First, he will accelerate a measure passed by Congress that reduces the maximum repayment on student loans from 15 percent of discretionary income annually to 10 percent.
The White House wants it to go 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.
Second, he will 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 loan.
The consolidated loan would carry an interest rate of up to a half percentage point less than before. This could affect 5.8 million more borrowers.