College students with massive debt would benefit under stimulus idea proposed by President Barack Obama.
The president is suggesting college students pay back government loans based on their post-college income, and that those payments be limited to 20 years. The "Pay As You Earn" proposal would effect students who took out loans after 2008, and would not help students who have private loans.
Obama's proposal comes as experts warn about a "credit bubble" in the college loan industry, which is booming as tuition costs rise. In Wisconsin, the average college student graduated with $22,904 in student loans in 2009, with two-thirds of all students leaving school owing money.
The Obama administration said Wednesday the proposal would help 1.6 million college students lower their monthly loan payments.
Nationwide, students took out more than $100 billion in loans last year, in part to cover an 8.3 percent increase in public university tuition costs in 2010.
Critics accuse of the president of "buying votes" from young college students who are graduating with significant debt.
Despite rising loans costs, a Department of Education study found Wisconsinites are among the best in the nation at paying back their loans. About 5 percent of Wisconsin college students defaulted on their loans, placing the state in the top 5 in the country.
And, with Obama's announcement Wednesday, an existing federal program to reduce college loan payments was brought to the public's attention. The Department of Education's Income-Based Repayment program does much of what Obama is proposing with the added benefit of already being in place. Click here to see if you or your student is eligible for the program.