(For more on the 2012 presidential campaign, see ELECT.)
Oct. 26 (Bloomberg) -- President Barack Obama said the increasing debt burden being carried by college graduates is harmful to the economy and that his administration is acting to cut loan payments for millions of Americans.
With college tuition costs soaring, Obama told an audience of mostly students at the University of Colorado’s Denver campus that steep payments for education loans mean less consumer spending.
“We shouldn’t saddle you with debt when you’re starting out,” Obama said to a crowd of about 4,000. “It’s painful for the economy and it’s harmful to our recovery.”
Obama spoke at the last event on a three-day trip that took him to Nevada, California and Colorado and was aimed at driving a message that he would sidestep an “increasingly dysfunctional” Congress and take administrative action to spur hiring and economic growth. Obama’s $447 billion package of tax cuts and spending, announced last month, was blocked by Republicans in the Senate and the administration is pushing lawmakers to hold votes on individual components of his plan.
“There are some in Washington who don’t seem to share the same sense of urgency” about the economy, he said. “How can you say no to creating jobs when so many people are looking for work?”
Mortgages, Student Loans
In the meantime, the president is laying out measures he can take without congressional approval, including altering a program to help homeowners refinance underwater mortgages and the steps to help ease the burden of student loans.
The rate of defaults on student loans was 8.8 percent in the two years through Sept. 30, 2010, the highest level since 1997, according to the Education Department.
At the same time, graduates of public universities have an average of about $22,000 in debt, up from $15,000 a decade ago, according to the New York-based College Board. At private colleges, they were saddled with about $28,000, up from $17,000.
Under the initiative Obama highlighted today, 1.6 million current college students and borrowers will be able next year to limit their monthly student-loan payments to 10 percent of their discretionary incomes, with the balance forgiven after 20 years, according to an administration fact sheet. Currently, students can cap their payments at 15 percent of discretionary income, with loans forgiven after 25 years, and the lower cap originally was scheduled to take effect in 2014.
Also next year, about 6 million students and recent college graduates who took out federal loans both directly from the government and through private lenders will be able to consolidate their loans with the Education Department and pay as much as half a percentage point less in interest, the administration said.
“Our economy needs it right now and your future could use a boost right now,” Obama said.
Jack Jennings, president of the Center on Education Policy, a Washington-based group that advocates for public education, said he thinks that the president’s loan provisions “will be effective because people are hurting economically more today than in the recent past and they are looking for any relief they can get.”
Young voters were a crucial constituency for Obama in the 2008 presidential election and he is seeking to revive their enthusiasm for his re-election campaign. He is heading into the 2012 election year with the nation’s unemployment rate hovering at or above 9 percent for more than two years. The unemployment rate for those 20 to 24 years old is 14.7 percent, according to the Labor Department
“I need you guys involved, I need you guys active,” Obama said.
--With assistance from Margaret Talev and Roger Runningen in Washington. Editors: Joe Sobczyk, Bob Drummond
To contact the reporter on this story: Kate Andersen Brower in Denver, Colorado at firstname.lastname@example.org
To contact the editor responsible for this story: Mark Silva at email@example.com