Obama’s plan would let current students cap their monthly repayment at 10 percent of discretionary income and any unpaid amount would be forgiven after 20 years. It also allows some borrowers to consolidate their loans at a lower interest rate. The president issued the new student loan plan through an executive order that beefs up a current law regarding student loans.

“This administration has been bypassing Congress on issue after issue after issue — they’ve sort of famously issued hundreds of rule changes and executive orders to bypass Congress, so I think that’s a mistake,” Rep. John Kline said on Fox and Friends. Kline, who chairs the education committee in the House has been sharply critical of most of Obama’s education proposals since gaining the post in 2010.

Kline added that the government should stop subsidizing student loans altogether.

“We simply can’t keep providing money from the federal government in the form of subsidized or actual loans and Pell Grants when we don’t have the money,” Kline said.

Kline had previously put out a press release saying Obama’s plan puts “politics before policy.”

“Despite the administration’s rhetoric, this plan will not create a single job, strengthen our economy, or promote fiscal responsibility,” Kline said. “What this plan will do instead is encourage more borrowing across the board. That means more debt for students, more debt for taxpayers, and more red ink on the government’s books.”

The Minnesota Independent reported this summer on close ties between Kline and for-profit colleges. Kline fought regulation of that industry, which industry critics say siphons off public tax money through deceptive practices.

Private and for-profit educational institutions are the top donors to Kline’s campaign and political action committee. Kline’s campaign has also benefited from private financial corporations that provide student loans.

Speaking in shirtsleeves and drawing on his own struggles with student debt as a young man, husband and father, Obama told the energized crowd that he was determined to act wherever possible to relieve economic distress without going through the gridlocked Congress.

“The reason I’ve been hitting the road so much, is because the people I’ve been talking to in cities and small towns, in communities all across America, let’s face it, they make a lot more sense than the people back in Washington,” Obama said.

Revving up to full campaign form, Obama said people around the country are hurting and spending months and years looking for work. He also reiterated the point, underscored by the Occupy Wall Street protesters lined up outside the building and at the back of the hall, that the deck has been stacked in favor of the wealthy and powerful for decades and to the detriment of the country.

“For decades too many of our institutions, from Washington to Wall Street, failed to adapt [to the globalized world] or they adapted in ways that didn’t work for ordinary folks. … We had a philosophy that said if we cut taxes for the very wealthiest and we gut environmental regulations and we don’t enforce labor regulations, that somehow, you know, if we just let Wall Street write the rules, then somehow that was going to lead to prosperity. Instead, it led to the financial crisis and the deepest recession since the Great Depression.”

The status quo has to change, he said, and added that Republican lawmakers “don’t share our sense of urgency.”

“We’re not going to wait for Congress. I’m going to act with or without Congress. Where they won’t act, I will, through a series of executive orders. … We’re going to look every day to see what we can do without Congress.”

Taking action now on educational debt

Obama’s plan is aimed at speeding up student loan repayment reforms passed last year but not scheduled to take effect until 2014. His executive order will lower the maximum percentage of income students will have to pay toward their student loans to 10 percent, and it will lower the number of years that must pass before such a debt can be forgiven from 20 from 25. Education seekers will also be able to consolidate loans in new ways that should provide lower interest rates.

The proposal drew roars from the “generation debt” crowd that packed the hall.

Auraria is an urban campus that hosts students at several different colleges and universities and that attracts a large number of returning students — people who work their way through school and depend heavily on federal assistance to pay expenses.

Obama made the point that the reforms will affect not just hundreds of thousands of current students but also the millions of former students who still still pay their student loan holders. The reforms could save individuals hundreds of dollars in loan payments each month.

U.S. Student loan debt has recently overtaken credit card debt. There is roughly $1 trillion in outstanding loans and this year’s crop of university graduates holds the highest average debt to date. Parents who aren’t themselves paying student loans are saving to pay the loans their children will may soon carry.

“The very fact that you are here investing in your education, making an investment in your futures tells me you all share my faith in America’s future. You inspire me,” Obama said.

“We live in a global economy where businesses can set up shop anywhere there’s an internet connection. We live in a time where over the next decade 60 percent of new jobs will require more than a high school diploma.

“Other countries are hustling to out-educate us so they can out-compete us tomorrow. They want the jobs of the future. I want you to have those jobs. I want Americans to have those jobs. I want us to win the future. That means we should be doing everything we can to put a college education within reach for every American.

“It’s never been more important, but let’s face it, it’s also never been more expensive.”

The middle-class connection

The president spoke informally about the debt he and his wife Michelle wracked up as students. He said together they owed in excess of $100,000 in student loans when they married.

“We combined liabilities, not assets,” he joked, building on a personal story that obviously resonated with the audience.

Although the October snow and sleet piled up on roadways throughout and around Denver, the standing-room-only crowd comprised of mostly students and faculty was fully energized — dancing in groups and shouting positive responses back to the opening band and to the President during his remarks.

Although it remains unclear if Obama will be able to motivate young voters in his 2012 reelection campaign as effectively as he did in 2008, the size, energy and scope of the Colorado audience is a strong indicator that he continues to build excitement within the demographic.

“It is great to be back in Colorado. It’s great to be here at CU Denver,” Obama said when he first stepped to the microphone. “I tend to have some pretty good memories of Denver. We had a little gathering here a few years ago at Mile High,” he said, jokingly referring to the 2008 Democratic National Convention, where he was chosen to be the party’s presidential nominee.

“So coming here gets me fired up even when it’s snowing outside,” he said. “I don’t know where else you can go sledding on Halloween.”

“These disturbing numbers clearly indicate the need for local, state, and national leaders to strengthen their prioritization of higher education,” said United States Student Association President Lindsay McCluskey. “Young people face a staggering unemployment rate far above the national average and cannot afford to begin a post-collegiate life while saddled with tens of thousands of dollars of debt.”

The Iowa Independent reported earlier this month 203,000 students in Iowa receive benefits from Pell Grants.

U.S. House Republicans sought $64 billion in cuts in Pell Grant mandatory funding over the next 10 years as a result of the deep reduction it would make in the 2011 fiscal year, through H.R. 1. It would go on to make a 30 percent reduction in 2014 to Pell grants, and a 34 percent reduction in 2017.

U.S. Rep. Paul Ryan (R-Wis.) proposed budget for FY 2012 would also bring Pell Grants down to “pre-stimulus” levels.

The current proposal in the House would bring the maximum grant down from $5,550 to $3,040 per year, its lowest level since 1998. The grants would go down to $2,090 in the 2012-13 school year. It would also throw 1.4 million students out of eligibility.

President Obama’s proposed 2012 budget would keep the maximum grant at $5,550. However, the Obama administration is putting forward the idea of scaling back year-round Pell Grants, eliminating the summer assistance. That proposal was included in the Continuing Resolution signed on April 15, but colleges say they are awaiting guidance from the U.S. Department of Education before proceeding.

Ryan argues, citing a 2005 study by the University of Oregon, that as Pell Grants increase, so to does the average tuition to attend college.

The Institute for College Access & Success defends against the study, saying most economists who study higher education do not find a link between federal aid and increases in tuition.

U.S. Sen. Tom Harkin (D-Iowa), the head of the Senate HELP committee, told The Iowa Independent in March that private non-profit universities were pleading with the U.S. Senate not to cut Pell Grants because of the effect it would have on other students and their budgets.

“They came in to see us and said if [the government] whacks the Pell Grants, their tuition will greatly increase,” Harkin said. “What happens is if some of these students don’t get that Pell Grant, then they can’t go to school. Now if they can’t go to school then the private colleges then have to increase the tuition on other students who may come in. If you increase that tuition that means some more may drop out, and that creates this ripple effect if you cut the Pell Grants.”

Harkin has been adamant that cutting assistance for students to attend higher education is not the answer. He criticized major companies who have been avoiding their taxes. He mentioned Carnival Cruise Lines bringing in $5 billion last year, but rather than paying their 35 percent tax bill, Harkin claimed they only paid 1.8 percent.

After hearing from Iowa colleges, U.S. Rep. Dave Loebsack (R-Iowa)  came out specifically in March against the Obama administration’s idea of scaling back year-round Pell Grants.

“I have visited schools throughout the Second District and heard directly from Iowa students how critical Pell Grants are to their education and to their futures,” Loebsack said. “I know first-hand what a difference education can make in a person’s life, and I strongly believe that Pell Grants should be available to students year-round.”

Student Debt Burden Growing

Iowa currently ranks 4th in the nation with an average of $28,883 in student debt.

The Pew Center for Research found there has been a trend over roughly the past decade of students taking out larger loans and more students borrowing to pay for college. In 2008, 60 percent of all college graduates had borrowed, compared with 52 percent in 1996.

Student loan debt outpaced credit card debt for the first time in 2010 and the indebtedness of collegiate students is expected to top $1 trillion for the first time in 2011.

The Obama administration did implement new rules for federal loans, to forgive student debt after a certain number of years. The income-based repayment forgives remaining debt if one pays 15 percent of their income for 25 years; 10 years, if they work in public service.

And already, the President is using Republican proposals to scale back student aid as he begins to campaign. Instead, Obama has told college students he would tax the wealthy and trim the Pentagon’s budget.

Federal law dictates that the education department forgive borrowers of their loan obligations if they develop severe and lasting disabilities after they took out federal student loans. The law is intended to spare disabled borrowers –- some of whom cannot and never will be able to work, and thus never be able to pay off their debt.

But currently, the process is tedious: Borrowers have to fill out endless forms and obtain medical records their doctors, and there is no written medical standard for determining a disability, and no formal appeals process for denial.

An internal report, first published in the Propublica/CPI investigation, uncovered internal documents from the federal student-aid ombudsman to the Education Department excoriating the department’s review process and recommending it be contract the decisions out to the other government agencies to determine disability.

The irony is that the department does contract out its loan-discharge decisions –- to private companies, who are also hired to manage other programs. And that’s part of the problem -– when decisions get back to the federal department, they often don’t make it back to the borrower who is still waiting for a response and meanwhile racking up interest on top of their piling debt. The ProPublica/CPI investigation pointed out cases of borrowers applying and reapplying to have their loans discharged for five years or longer and having to pay with their dismal Social Security checks.

The Office of the Inspector General has been criticizing the department’s practices for years, and internal review led to a switch in contractors last year.

Federal reforms have been made to ease the process for people who become disabled: In 2008, Congress passed a law that relaxed the discharge standard from terminal and indefinite to five full years and made it easier for veterans to be discharged immediately. Two years later, the Education Department implemented these changes, among others to improve communication with borrowers.

Reforms are nice, if they are actually practiced. But if the government can’t control its own departments, who can?

Some background: Foxx has received $5,000 in campaign contributions in the last few election cycles from student loan corporation Sallie Mae, an organization that used to provide federally-guaranteed loans to students until Congress passed reform of the practice in 2010, effectively cutting out the middle-man in the process. (Sallie Mae now offers private student loans.) Foxx expressed desire to hold hearings over the loan-reform bill when she assumes the chair of the subcommittee, she told The Chronicle of Higher Education this week:

Ms. Foxx has criticized legislation that ended the bank-based program for supplying federal student loans in favor of 100-percent direct lending, in which students obtain their loans from the Department of Education. She said on Tuesday that the bill “eliminated choice, competition, and innovations from student lending,” and promised hearings aimed at making “improvements to a very flawed law.”

In the clip, Maddow laid out the implications of student loan reform and why it was a “total no-brainer” in easing the deficit and allowing for more loans to students. The section on Foxx goes through the first 3:30 of the clip:

Visit msnbc.com for breaking news, world news, and news about the economy

The settlement, which Nelnet announced late Friday, is the latest to result from a lawsuit brought by Jon H. Oberg, a former Education Department researcher, on behalf of the federal government. A federal judge ordered Nelnet and seven other student-loan companies to participate in a settlement conference last week after two of the other defendants in the case, Brazos Higher Education Service Corporation and Brazos Higher Education Authority, reached a tentative settlement agreement with Mr. Oberg.Among the other defendants in the case is Sallie Mae, the nation’s largest student-loan company. A year ago, the Education Department’s inspector general issued an audit concluding that Sallie Mae overbilled the Education Department for $22.3-million in student-loan subsidies and should be required to return the money to the department.

The second shows that for-profit universities have much lower rates of student loan repayment:

Although the department issued no analysis or comparison of repayment rates by sector, outside advocacy groups that analyzed the data found that in 2009, repayment rates were 54 percent at public colleges and universities, 56 percent at private nonprofit institutions, and 36 percent at for-profit colleges.

“I think it’s notable that the for-profits are the only type of school where the majority of students are unable to repay their loans,” said Debbie Frankle Cochrane, program director at the Institute for College Access and Success, which has called for tighter regulation of for-profit institutions.

At some for-profit colleges, the repayment rates were startlingly low. For example, 33 of the 86 Corinthian Colleges’ Everest locations had repayment rates of less than 20 percent — and at several, the rates were less than 10 percent.

At the headquarters of the University of Phoenix, the nation’s largest for-profit education company, the repayment rate was 44 percent, compared with 38 percent at DeVry and 27 percent at Kaplan University, a unit of the Washington Post Company.

“I think this data could have a powerful effect on institutions and students,” said Terry Hartle, senior vice president at the American Council on Education. “No reasonable person will want to go to a school where only one in five students can pay back their student loans.”

The second story sent education stocks lower on Wall Street: If students have a harder time repaying loans to for-profit universities, they might look to other options. But the first story sent Nelnet’s stock up, as the company, had it not come to a settlement, might have faced a much, much larger penalty — three times the $407 million it defrauded from the government, The New York Times says.

“For a long time, our student loan system has worked for banks and financial institutions,” Obama said. “Today, we’re finally making our student loan system work for students and all of our families.”

Sallie Mae, the nation’s largest student lender, felt differently.

The vote was a technicality. The House had passed the bill Sunday night, sending it over to the Senate. But obscure rules governing the reconciliation process forced Senate lawmakers to strip two small provisions before they passed the bill this afternoon. The changes meant that the House would have to approve the proposal again before it could go to the president’s desk — which it did by a vote of 220-207.

Here’s a recap of how reconciliation tweaks the larger bill:

1) Funding: The Senate bill would hit the wealthiest Americans — individuals earning more than $200,000 and families earning more than $250,000 — with a 0.5 percent increase in the Medicare payroll tax. The reconciliation bill would add a 3.8 percent tax on unearned income — a category that includes things like interest, dividends and capitol gains on investments.

The Senate bill also applies a 40 percent tax (beginning in 2013) to the highest-priced insurance plans — those costing more than $8,500 for individuals and $23,000 for families. The reconciliation bill keeps the tax, but hikes the dollar threshold that trigger it — to $10,200 for individuals and $27,500 for family plans. In both the Senate and reconciliation bills, the thresholds are even higher for those in high-risk jobs like coal mining and firefighting. The reconciliation bill also postpones the tax until 2018.

2) Doughnut Hole: As part of its $80 billion deal with Sen. Max Baucus (D-Mont.), the pharmaceutical lobby agreed to cut the cost of name-brand drugs by 50 percent when seniors hit the doughnut hole, which is the not-meant-to-be-flattering name of the coverage gap in Medicare’s prescription drug benefit. And that’s where the Senate bill leaves it.

The reconciliation bill builds on that foundation, giving seniors in the doughnut hole an additional $250 toward their drugs in 2010, and then hiking that amount incrementally until the doughnut hole is fully closed by 2020.

3) Individual Mandate: The Senate bill requires most Americans to buy health insurance or pay a financial penalty of either $750 or 2 percent of income, whichever is larger. The reconciliation bill would alter the penalty slightly, to the larger of $695 or 2.5 percent of income.

4) Medicaid Rates: While expanding Medicaid coverage to include most folks living below 133 percent of the federal poverty level, the Senate bill would leave Medicaid rates alone. This is a problem, because Medicaid rates are so low that more and more doctors are refusing to see those patients. Recognizing that there’s little value in a health insurance program that doctors don’t accept, House leaders in their reconciliation bill hiked Medicaid rates for primary care services to at least the level that Medicare pays.

5) Cornhusker Kickback: The Senate bill includes the now infamous sweetheart deal that Democratic leaders carved out to win the vote of Nebraska Democrat Ben Nelson. Under that provision, the federal government would pay 100 percent of the cost of expanding Medicaid in Nebraska — forever. (By contrast, the other states would begin paying a portion of those costs over time.)

The reconciliation bill strikes the Cornhusker Kickback dead.

The reconciliation bill also eliminates $61 billion in federal subsidies to the private middlemen who make student loans.

The Glover Park Group, a DC-based political consulting firm founded by former Clinton staffers, blasted the lending legislation yesterday, just about the same time that the bill’s Democratic sponsors — Sen. Tom Harkin (Iowa) and Rep. George Miller (Calif.) — were promoting it on Capitol Hill.

“Miller and Harkin Push a Bill Doomed to Fail while Rejecting Bipartisan Solutions,” a Glover Park operative, Tim Miller, wrote in an unsolicited e-mail message to reporters. “While Miller and Harkin misguidedly storm forward with a bill that is doomed to fail, colleges and students are being denied the immediate benefits that would result from bipartisan, comprehensive student loan reform that could be passed with a few enhancements to the legislation.”

The “enhancements” the Glover Park crew is endorsing are found in a separate proposal that would allow private lenders to keep making student loans — and to keep profiting from those loans. So is it just a coincidence that the nation’s largest student lenders are pushing the very same proposal?

“We don’t comment on our clients,” Miller of Glover Park wrote to Herszenhorn.

Rep. George Miller (D-Calif.) (Bob Larson/Contra Costa Times/ZUMA Press)

As Capitol Hill Democrats consider proposals to pull the country out of its huge deficit hole, they’re repeatedly running into a formidable impediment: themselves.

On issues as diverse as health care and student lending, provisions designed to rein in deficit spending have all run smack into the ubiquitous inclination of lawmakers to protect their home turf from the scalpel of budget cuts. Their message is familiar: Congress must do something to get its fiscal house in order, just don’t do it in my back yard. And party affiliation is largely irrelevant.

[Congress1] The most recent case surrounds a popular proposal to eliminate government subsidies to private companies that lend to students. The legislation, which has already passed the House and enjoys enthusiastic support from President Obama, would save the government tens of billions of dollars over the next decade — most of which would go toward expanding scholarships for low-income college students. Never an overly partisan issue, it was proposed by President Bush several times during his tenure. Senate Democrats are hoping to attach the legislation to their sweeping health care reform proposal.

Not so fast.

Those billions of dollars don’t go nowhere. And six Senate Democrats — Bill Nelson (Fla.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), Mark Warner (Va.), Jim Webb (Va.) and Tom Carper (Del.) — voiced their objections to the proposal on Tuesday. The lawmakers — most representing hubs of large, private lenders — say they support student loan reform “to generate historic budget savings,” but have concerns that the White House proposal “could put jobs at risk.” They’re asking Senate Majority Leader Harry Reid (D-Nev.) to approach any action “in a thoughtful manner that considers potential alternative legislative proposals.”

Though short on specifics, the message is clear: The lawmakers want to rein in spending, but not if it threatens jobs in their states.

It’s an argument that’s applicable to almost every budget reform lawmakers tackle. That is, even if some industry, or project, or siphon of federal spending is utterly wasteful — even if it’s utterly pernicious — it’s still likely that somebody’s livelihood depends on it, and therefore someone in Congress is going to defend it. (Some examples include the fights over dropping the F-22 fighter jet; canceling the presidential helicopter; and forcing the automakers to keep dealerships around even if they weren’t selling cars).

In a more recent case, the Senate, as part of its health care bill, included creation of an independent commission empowered to recommend Medicare pay reforms if Congress didn’t do enough to control program costs. The recommendations would take effect unless Congress voted them down. Yet House Democrats are balking at the idea. Rep. Mike Capuano (D-Mass.), for example, sent a letter to supporters Thursday, saying he’s worried that the panel’s recommendations “would quickly and inevitably result in Massachusetts losing tens of thousands of jobs and would seriously undermine one of our region’s economic engines.”

“Other regions with heavy concentrations of health care would feel a similar impact,” he wrote.

Such resistance highlights the question facing leaders on Capitol Hill as they try to rein in federal deficits: How does Congress “generate historic budget savings” when thousands of jobs likely hinge on the spending?

The question is timely — and not only because the country is in the middle of a jobs crisis. The nation’s budget deficit hit $1.4 trillion last fiscal year and is on pace to top that figure this year. Much of that spending represents emergency measures enacted to address the recent economic downturn, the worst the country has suffered since the Great Depression. Yet even absent those temporary measures, federal spending remains on an unsustainable course, with Medicare and Medicaid alone threatening to swamp the federal budget in a few short decades.

Aiming to maximize tax dollars, the House passed a bill in September that would eliminate the Federal Family Education Loan program, or FFEL, under which the government subsidizes private lenders that cater to students. Instead, all loans would originate directly from the U.S. Treasury, though private lenders would still compete to service those loans. The Congressional Budget Office has estimated that the provision to eliminate the for-profit middle man would alone save the federal government $67 billion over the next decade. The bill’s sponsor, Education and Labor Committee Chairman George Miller (D-Calif.), told reporters at the Capitol Thursday that the current system represents “a titanic boondoggle in excess subsidies to some of the nation’s rich and most powerful banks.”

Banks, he could have added, that employ large numbers of folks in a large number of states.

The regional protectionism is hardly limited to Democrats. When the White House last month proposed to cut an expensive defense contract in Alabama, for example, GOP Sen. Richard Shelby (Ala.) was quick to retaliate, placing a hold on every Obama nominee before the Senate. When President Bush vetoed a $300 billion farm bill in 2008 — citing taxpayer subsidies to wealthy farmers — it was Sen. Saxby Chambliss (R-Ga.), among other farm-state Republicans, to rally the successful override. The list goes on.

Joshua Gordon, policy director for the Concord Coalition, a budget watchdog group, said the FFEL debate mirrors that over Medicare Advantage, the program under which private companies cater to Medicare patients. Each program represents “a system that everyone knows is inefficient,” Gordon said, but reforms have gone nowhere in Congress, largely due to the local interests of some members.

The reluctance of Congress to make difficult budget decisions, Gordon added, only bolsters the argument for an independent deficit commission “empowered to think of the country on the whole and not just individual districts.”

Then again, in bipartisan fashion, the Senate shot down such a proposal last month.

“There is one thing that often unifies Congress,” Gordon said, “and that is irresponsibility.”