WASHINGTON (Reuters) - President Barack Obama is taking steps to ease the burden of student loans, the White House said Tuesday, potentially helping millions of cash-strapped college graduates in a tough economy.
Obama plans to accelerate a plan to cap student loan payments at 10 percent of income, bringing it forward to start in 2012 from 2014.
“Steps like these won’t take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference,” he said in a statement.
The loans initiative will be the third such move by Obama in as many days, following action to aid homeowners and boost hiring of military veterans. The White House wants to show he is an activist president battling a “do-nothing” Congress.
The loan changes do not require approval by Congress.
Republican lawmakers blocked a $447 billion jobs plan put forward by Obama last month because it raises some taxes.
Obama will announce the measure in Denver Wednesday as he wraps up a swing through western U.S. states that will be vital to his re-election campaign in 2012.
The White House estimates the loan changes could cut monthly payments for 1.6 million graduates.
Student debt will also be forgiven after 20 years, compared with 25 years under current law.
More than 36 million Americans have federal student loan debt, but only 450,000 have so far taken advantage of the existing income-based repayment program.
Obama will also make changes to allow 6 million students to bundle together certain federal loans to allow a single monthly payment, reducing the risk of default caused by juggling multiple debt obligations.
The option will be open from January and those that take it up will also get a 0.5 percentage point cut in the interest rate on some of their loans, lowering monthly payments and potentially saving them hundreds of dollars in interest.
“College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments,” said U.S. Secretary of Education Arne Duncan.
Reporting by Alister Bull; editing by Todd Eastham