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Ideas resurrected 
to help the middle class

February 13, 2010


There's no question what pocketbook issue is most dear to Americans.

It's relieving a 9.7 percent unemployment rate and securing more jobs. The concern is at the top of public opinion polls and was a focus of President Barack Obama's recent State of the Union address.

But the administration also has resurrected some pet pocketbook ideas for the middle class that have been sitting in Washington files for years: aid for moderate-income people with children, relief for people dealing with painful college loan payments, and nudges to get people saving for retirement.

All were mentioned in Obama's speech and are likely to be among the recommendations in a report to be issued this month by the Middle Class Task Force , headed by Vice President Joe Biden . Given the constraints of a burgeoning budget deficit, it's difficult to imagine much more than gestures to the middle class now, but the task force is expected to ask Congress to work on the following:

COLLEGE LOAN HELP

With the total cost of a four-year education close to $80,000 at many public universities, students who borrow money for college leave with an average of $20,000 in student loans and about $3,000 in credit card debt.

Tuition has been rising at a rate 10 times faster than the median family income since 1979, according to government figures, so loans are necessary for many students. Student advocates say large student loans begin a spiral of ongoing debt for many young Americans.

The Obama administration proposal: After leaving college, those with student loans would not have to devote more than 10 percent of their income to college loan payments after a basic living allowance. And if after 20 years a balance remained, it would be forgiven. Currently, monthly payments can't exceed 15 percent of income, and the responsibility to pay off loans ends after 25 years.

Another proposal would increase funding for Pell grants for low-income students and extend $2,500 college tax credits for middle-income families.

PAYING FOR CHILD AND ELDER CARE

According to the task force, since 2000 the cost of child care has grown twice as fast as the median income of families with children, and in 39 states exceeds the cost of in-state public college tuition.

Average yearly costs range from $4,000 to $15,000 for infants and $4,000 to $11,000 for 4-year-olds.

The task force is proposing an expansion of the child-care tax credit. The maximum credit now for families with two children and incomes up to $43,000 is $1,200 . Under the proposal, the limit would be $2,100 . Families with incomes under $115,000 could qualify for a lesser amount.

The credit would reduce taxes people pay. In addition, for low-income parents, the task force is recommending $1.6 billion in child-care assistance for roughly 200,000 children. Also, $100 million would help older Americans with in-home care, transportation and services so they can remain in their homes.

RETIREMENT SAVING

Even before the recession and stock market crash in 2007, Americans were far behind with retirement saving. The Center for Retirement Research has calculated that 51 percent of households will not be able to keep up their standard of living in retirement.

To address this, many large employers, with the government's blessing, started a couple of years ago to enroll employees in 401(k) plans automatically and to place money from employees' paychecks in stock and bond mutual funds. Employees can decline to participate.

But less than 10 percent opt out. Research shows inertia is a powerful force: People often don't enroll in 401(k) plans or invest well if they must take action, but they don't drop out if their employer enrolls them automatically.

The next move is to extend the practice to small employers, many of which don't offer 401(k) plans. Under the administration's proposal, small employers would enroll employees automatically in IRAs, which are easier to administer than 401(k) plans.

After accumulating $5,000 , an employee's money could be invested in stock and bond funds called target-date funds, which are designed to get people prepared for a certain retirement date.

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McClatchy-Tribune Information Services