– Crushing college debt loads took center stage Monday as President Obama signed an order that could lower payments for millions of Americans with student loans and endorsed a Senate measure that would allow borrowers to refinance such loans at lower rates.

The White House’s move, which allows capping student loan payments at 10 percent of the borrower’s monthly income, could help more than a half-million Minnesotans.

But it immediately provoked sharp debate on Capitol Hill.

U.S. Rep. John Kline, the Minnesotan who chairs the House Education Committee, urged Obama to work with Republicans to curb college costs rather than rely on executive orders.

“Nothing the president announced … will make the cost of higher education more affordable; nothing the president promised will help graduates find the jobs and opportunities they desperately need,” said Kline, chairman of the House Education Committee. Senate Republicans also panned Obama’s plan.

Both Obama’s order and the expected Senate vote indicate that Democrats are eyeing college debt as a key issue in the lead-up to the November elections.

“College affordability is a huge issue,” said U.S. Sen. Al Franken, a cosponsor of the Senate bill that would allow borrowers to refinance their student loans at lower rates. “This has become … one of the defining issues of the middle class squeeze.”

Democrats and Republicans agree that student loan debt is weighing down the middle class and the economy. A recently released Congressional Budget Office report estimates outstanding federal student loan debt at roughly $1 trillion. Outstanding private student loans totals were estimated at $100 billion.

The debt problem is particularly acute in Minnesota, which has the nation’s fourth-highest level of average student debt. Data from the Minnesota Office of Higher Education shows that 2010 graduates who borrowed had an average debt load of $29,800.

Franken is trying to stir up support for legislation, written by Massachusetts Sen. Elizabeth Warren, to let college students with federal student loans refinance at the interest rates now offered to new borrowers. The interest rate for undergraduate Federal Stafford Loans — currently 3.86 percent — has been as high as 10 percent in some years.

Refinancing some of his old loans “would make a big difference,” to 36-year-old William Schultz, a recent Hamline University graduate who accumulated $160,000 in student loan debt over the past 13 years while earning bachelor’s and masters degrees. At current rates, Schultz expects his monthly payments to balloon to $1,000 per month — nearly half his income from his job as an information officer for Minnesota Management and Budget. “You think ‘Just get through school and you can consolidate [loans] at the end it’ll be reasonable,’” Schultz said. “It’s a little bit more difficult than I thought.”

Obama has thrown his support behind the legislation, but even if it passes the Senate it is likely to hit a roadblock in the Republican-led U.S. House, where lawmakers oppose the proposed tax increase on people with incomes between $1 million and $2 million to fund the loan refinancing program.

“That’s going to make it pretty hard to stomach for Republicans,” said Matthew Chingos, a fellow at the Washington, D.C.-based Brookings Institution.

Risk and reward

Democratic U.S. Sen. Amy Klobuchar took to the Senate floor last week to push for passage of the loan refinancing bill, saying her life would have taken a different course without access to affordable education.

“Outstanding student loans now, they are not like something you can fit in a coffee can,” Klobuchar said. “They are dragging us down by the millions.”

Kline declined to comment on Warren’s legislation. The House Education Committee is “examining opportunities to strengthen and improve the federal student loan system” as it prepares to rewrite the Higher Education Act, said spokeswoman Alexandra Sollberger.

Last summer, Congress faced a doubling of interest rates on certain new student loans. With the support of Obama and congressional Democrats, Kline helped engineer a deal to lower current loan interest rates.

But the legislation doesn’t help students, like Schultz, saddled with older debt.

Conservatives in both chambers of Congress remain leery about the federal government getting into the business of refinancing loans with default rates climbing and college costs skyrocketing. Nearly 15 percent of students default on their federal loans within three years.

Critics say Warren’s loan refinancing legislation skirts the issue of rising costs.

“When people talk about student loan debt, they’re really talking about a symptom of the actual problem, which is that college is more expensive so people are borrowing more,” said Chingos, the Brookings Institution fellow. “It doesn’t do anything about that.”

Drowning in debt, graduates like Schultz await relief in any form. A recent Pew Research Center survey found that the burden falls heaviest on recent graduates: A record high 37 percent of households headed by someone younger than 40 has student loan debt.

“Imagine walking out into a tough job market and you have $160,000 you have to pay back,” Schultz said. “It would be a huge relief to be able to build a life.”


Corey Mitchell is a correspondent in the Star Tribune Washington Bureau. Twitter: @C_C_Mitchell