The State of Obama: Did He Blow Off the Student Loan Crisis?

NEW YORK (MainStreet) — The student loan crisis got its 15 seconds of fame during the State of the Union address last night when President Obama pledged to "guaranty every child access to a world class education."

That paved the way for his claim that his administration has "worked with lenders to reform student loans."

He didn't say how. He also said his administration had worked to "cap student loan payments to 10% of income."

While he gave no additional details, he seemed to be referring to The Income-Based Repayment (IBR) plan, which was enacted as part of the College Cost Reduction and Access Act of 2007 — passed before he was elected - and was made available on July 1, 2009, after he took office. Income-Based Repayment is available only to federal loans and not at all to private loans.

According to the Website www.finaid.org, "The monthly loan payments are capped at 15% of discretionary income with forgiveness of any remaining debt including accrued but unpaid interest after 25 years." Discretionary income is gross income minus the poverty line that corresponds to your family situation and state of residence.

The improved IBR rate of 10% will be available on new loans made on or after July 1, 2014, cutting monthly loan payments by one-third.

A drawback to IBRs is that since a borrower has a lower monthly payment to make, it will take longer to pay back these loans, since the monthly payments are reduced, increasing the amount of interest that has to be paid.

In a response to the address, Rep. John Kline (R-Minn.), chair of the House Workforce and Education Committee, noted that "college costs are skyrocketing," which he attributed to "the same flawed agenda and failed status quo" of the Obama administration.

The extent of the student loan crisis was underscored — perhaps unwittingly — by a guest First Lady Michelle Obama picked to join her in the House gallery for the speech.