Obama calls for loan forgiveness for public service, transparency

In a State of the Union address that ranged from job creation to education reform, President Obama also called for restoring trust in government, streamlining the federal budget, and extending debt forgiveness to students who spend 10 years in public service careers.

Saying "no one should go broke because they choose to go to college," Obama proposed a program that would limit student loan payments to 10 percent of an individual's income and forgive their entire debt after 10 years of public service.

The president acknowledged that challenges exist for those who pursue public service.

"We face a deficit of trust -- deep and corrosive doubts about how Washington works that have been growing for years," Obama said. "To close that credibility gap we must take action on both ends of Pennsylvania Avenue to end the outsized influence of lobbyists; to do our work openly; and to give our people the government they deserve."

Obama's student loan debt forgiveness proposal could be an extension of an existing program, the 2007 College Cost Reduction Act, which took effect in July 2009. That law allows students to pay off federal loans or loans backed by federal guarantees at rates tied to their income, and have those loans forgiven after 10 years of public service in all levels of government and 501(c)3, or nonprofit, organizations. The program does not apply to private loans.

Rep. John Sarbanes, D-Md., who wrote the public service provisions of the loan bill, said he was glad Obama had highlighted the loan forgiveness program.

"I am proud that this program will help students follow their dreams of public service without burdensome education debt."

In a conference call with reporters before the speech, administration advisers said the address also would include new government transparency initiatives. Obama called for new rules requiring lobbyists to disclose their contacts with executive branch officials and Congress, and for limits on their campaign contributions. He recommended that Congress create a central Web site to track earmark requests. But he did not address some of the transparency promises of his presidential campaign, including posting legislation online or his administration's efforts to use technology to clarify government processes for the public.

Obama made little mention of government management, though he did condemn delays in the Senate confirmation process, saying "the confirmation of well-qualified public servants should not be held hostage to the pet projects or grudges of a few individual senators." He alluded to reorganizations of the Justice Department's Civil Rights Division and modernization efforts at the Veterans Affairs Department.

The president also emphasized the need to cut government spending. In addition to the limited spending freeze his administration announced earlier in the week, Obama said his administration had already identified $20 billion in savings. "Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't. And if I have to enforce this discipline by veto, I will."