With the $1.2 trillion student loan crisis accelerating, President Barack Obama gave a nod in his State of the Union speech to the millions of young Americans starting their adult lives in crushing debt but offered no new proposals for relief.
"We're shaking up our system of higher education to give parents more information, and colleges more incentives to offer better value, so that no middle-class kid is priced out of a college education," Obama said Tuesday night. "We're offering millions the opportunity to cap their monthly student loan payments to 10 percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt."
The cap was put in place by the Health Care and Education Reconciliation Act,which takes effect this year. Students enrolling in college in 2014 or later will be able to opt for income-based repayment of their loans, allowing for a lower monthly payment.
Under existing law, borrowers must pay up to 15 percent of their income toward loans. The new initiative allows them to cap payments at 10 percent. For those who make their monthly payments for 20 years and choose this plan, the remaining balances will be forgiven at that point, according to the White House. Military personnel, teachers, nurses and other public service workers who opt for the plan will see their remaining debts forgiven after a decade.