By Susan Heavey
WASHINGTON (Reuters) - Elbot Carman, a 25-year-old aspiring graphic designer, made so little money after earning his master's degree last year that the U.S. government now says he can hold off making payments on his school loans.
Carman owes $140,000 in a mix of government and private student loans. Last year he earned $12,000.
"That was so low that they are not requiring me to make a payment this year," said Carman, who works a paid and an unpaid internship and recently moved back in with his mother in Lawrenceville, Georgia to cut costs.
Carman signed up for a government program that helps indebted students by limiting what they owe each month and, for some, forgiving their remaining balance after 10 or 25 years.
He is not alone. As U.S. lawmakers consider how to keep interest rates on certain student loans from escalating, a growing number of students have sought help through a bipartisan 2009 initiative. In less than three years, more than 675,000 borrowers have signed up, according to the U.S. Department of Education.
Educators and policymakers also are looking for new solutions to a mountain of student debt that has reached the $1 trillion mark. With a November 6 presidential election looming, both President Barack Obama and his presumed Republican challenger Mitt Romney have targeted student loans as a growing problem for American families and the struggling U.S. economy.
The average undergraduate leaves school today owing nearly $29,000 and graduate students owe about $44,000, according to an analysis by Mark Kantrowitz, publisher of the popular education financing websites FinAid.org and Fastweb.com.
Interest rates on subsidized federal Stafford student loans, one of the main loans available to students, are set to double on July 1 unless Congress steps in to prevent it. On Tuesday, Senate Republicans blocked a White House-backed bill that would end a tax break for the wealthy to fund an extension of the lower rates, paving the way for possible compromise.
But that debate is aimed directly at middle class voters more likely to cast a ballot this fall. The repayment programs are a wider effort to help cash-strapped students.
Congress created the Income-Based Repayment Plan in 2007 to take some of the sting out of mounting student bills. The Bush administration program, which finally began in 2009, limits struggling students' payments to 15 percent of their income and absolves debt after 25 years.
Students who become teachers, police officers and other public servants could see their loans forgiven after 10 years.
In 2010, Obama signed into law a new plan to expand the forgiveness program starting in 2014. Qualifying students with federal loans could see their payments capped at 10 percent of their income, down from 15 percent, and forgiven after 15 years.
Last year, the administration tried to speed up that effort through Education Department regulations. The "Pay as You Earn" proposal could widen the forgiveness programs by the end of 2012 - if U.S. education officials can pass the rule by November 1.
About 1.6 million borrowers could benefit over 10 years when that happens, according to department policy experts.
'MUCH NEEDED RELIEF'
There's little doubt about the strain student debt creates on borrowers.
"As the amount of debt and interest rates increase, a greater percentage of family income must be devoted to repaying student loans instead of other priorities," said FinAid.org's Kantrowitz, whose unofficial Student Loan Debt Clock on Tuesday became the latest barometer to hit the $1 trillion mark.
He says borrowers delay getting married, having kids and reaching other milestones. They also take longer to buy big ticket items like cars or houses and delay saving for their own children's college expense, continuing the cycle of student debt, he adds.
Even Obama recently noted that he and First Lady Michelle Obama just finished paying off their student loans eight years ago.
Spencer Pritchard, a 19-year-old college freshman, said his growing student debt impacts the way he thinks about his future.
He just racked up $13,000 from his first year studying political economics at the University of California at Berkeley. He had planned to work at a nonprofit, but now worries that he needs higher-paying work.
"I kind of had the idea of going into the public service after this, but that's going to be difficult," he said.
Education officials and other student debt activists say many more students qualify for forgiveness programs - they just don't know about them.
"I think it provides much needed relief for people," said Deanne Loonin, who oversees the National Consumer Law Center's Student Loan Borrower Assistance Project, but "they're very underutilized."
Compared to the 675,000 students on the income-based repayment plan, the effort in Congress to keep some Stafford loan interest rates at 3.4 percent is estimated to affect 7.4 million borrowers.
Some lawmakers also are pushing a House plan to expand loan forgiveness and interest rate caps. The Student Loan Forgiveness Act, sponsored by U.S. Representative Hansen Clarke, a Michigan Democrat, would also allow students to roll private bank student loans into more flexible, federal ones.
Still, critics point out that most students manage to repay loans without help. And there are other options, they say.
John Boehner, the House of Representatives' top Republican, said last month that he spent seven years "working every job I could get my hands on" to pay for college.
Conservative columnist Cal Thomas wrote on May 5: "If students and their parents choose expensive schools, they should accept the responsibility and cost accompanying that decision."
Carman said he's grateful for a federal reprieve but still must tackle his private student loans. Private lenders such as banks account for a significantly smaller portion of student loans in comparison to those available from governments.
The real problem, he says, is rising college costs - which he wishes he had weighed before taking on heavy debt.
"Ideally, student lending needs to die, it really does. It's just not sustainable," he said.
(Reporting By Susan Heavey; Editing by Marilyn W. Thompson and Paul Simao)