Obama unveils student loan debt proposal

President Barack Obama recalled his struggles with student loan debt as he unveiled a plan yesterday 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.

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 from the College Board 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.

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 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."

On Long Island, Mark Ambrose, 20, of Roosevelt, an economics major and junior at Hofstra University, said, "I think it's great. Anything to lower costs I'm happy about. Of course it's political because [Obama] wants to be re-elected, but it will help kick-start the economy and ease the financial burden on kids coming out of school trying to get their first jobs."

Sarah Carbone, 27, a graduate student in library science at C.W. Post, lives with her parents in East Meadow, has about $70,000 in private bank and federal student loans accumulated for graduate school and her undergraduate degree from Adelphi University. She works 35 hours a week at three jobs, including a job teaching English via webcast to students in South Korea from 11 p.m. to 3 a.m.

Obama's measures are "definitely a good first step," she said. "We just want recognition that we were trying to do the right thing; we weren't racking up credit card debt."

Darlyn Ramos, of Queens, 26, a third-year law student at Hofstra, will graduate with about $180,000 in loan debt and no certain job prospects as of yet. Of Obama's announcement, he said, "Whether or not it's political, it surely helps those who face the payment of interest. If we accept that student loans are a problem, then this is a measure to reduce the burden."

With Carol Polsky