Obama takes on student loan reliefPosted: Updated:
(AP) - President Barack Obama is outlining a planWednesday to allow millions of student loan recipients to lowertheir payments and consolidate their loans, in hopes of easing theburden of the No. 2 source of household debt. The move to assist struggling graduates and students could helpObama shore up re-election support among young voters, an importantvoting bloc in his 2008 campaign, and appeal to their parents, too.Student loan debt also is a common concern among Occupy Wall Streetprotesters. The loans have become particularly painful for many amid thenation's economic woes, high unemployment and soaring tuitioncosts. They are second only to mortgages as a portion of Americans'debt, coming in ahead of credit cards. Obama's planned announcement in Denver comes the same day as anew report on tuition costs from the College Board. It showsaverage 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, anall-time high. The White House said Obama will use his executive authority toprovide student loan relief in two ways. First, he will accelerate a measure passed by Congress thatreduces the maximum required payment on student loans from 15percent of discretionary income annually to 10 percent. The WhiteHouse wants it to go into effect in 2012, instead of 2014. Inaddition, the White House says the remaining debt would be forgivenafter 20 years, instead of 25. About 1.6 million borrowers could beaffected. Second, he will allow borrowers who have a loan from the FederalFamily Education Loan Program and a direct loan from the governmentto consolidate them into one loan. The consolidated loan wouldcarry an interest rate of up to a half percentage point less thanbefore. This could affect 5.8 million more borrowers. Education Secretary Arne Duncan told reporters on a conferencecall that the changes could save some borrowers hundreds of dollarsa month. "These are real savings that will help these graduates getstarted in their careers and help them make ends meet," Duncansaid. The White House said the changes will carry no additional coststo taxpayers. Last year, Congress passed a law that lowered the repayment capand moved all student loans to direct lending by eliminating banksas the middlemen. Before that, borrowers could get loans directlyfrom the government or from the Federal Family Education LoanProgram; the latter were issued by private lenders but basicallyinsured by the government. The law was passed along with the healthcare overhaul with the anticipation that it could save about $60billion over a decade. The law change was opposed by many Republicans. At a hearingTuesday, Rep. Virginia Foxx, R-N.C., who chairs a subcommittee withoversight over higher education, said it had resulted in poorercustomer service for borrowers. And Senate Republicans issued anews release with a compilation of headlines that showed thousandsof workers in student lending, including those form Sallie MaeInc., had been laid off because of the change. Today, there are 23 million borrowers with $490 billion in loansunder the Federal Family Education Loan Program. Last year, theEducation Department made $102.2 billion in direct loans to 11.5million recipients.