Obama will also call for caps on some student loans, limiting a borrower's payments to 10 percent of his or her income, and forgiving all remaining debt after 10 years of payment for those in public service work — and 20 years for all others.
This cap and forgiveness program is similar to the student loan program in the UK. The model helps reduce some of the asymmetries associated with student loan debt (really easy to obtain, hard to predict rate of return, and almost impossible ability to discharge) by ensuring there is a finish line to the loan race and by encouraging people to obtain higher education.
I fully support such a system. Education, particularly legal education, is a huge financial gamble. The current student loan system relentlessly punishes those who lose the bet until the day they die. This alternative model better helps apportion the risk of obtaining an education. While the individual who ultimately receives the education gets the most benefit (and correspondingly, should pay for that benefit), there is a huge societal interest in educating the masses. Because both the State and the student benefit, they should rightly split some of the risk/cost. Simply loading the debt onto the student without the possibility of discharge ensures that such a student will be held back financially for the rest of his life (hard to get credit if you can't pay your $3500 a month student loans).
This is a sensible solution. Let's hope it goes somewhere.