Essentially, the president has just offered a college student bailout as the finial initiative of his “We Can’t Wait” economic plan.

Two key provisions offered in the plan (as pointed out by Business Insider):

People who hold both government-backed private sector student loans and direct loans issued by the government will be able to consolidate those debts in one government-backed loan, thereby lowering interest rates and reducing monthly payments. The administration estimates this will affect about 5.8 million people.
The plan will accelerate income-based payment programs already passed by Congress, which allow college graduates to cap their payments at 10 percent of their income, rather than the existing 15 percent cap. Under Obama’s executive rollout, the new cap, originally scheduled to take effect in 2014, will take effect in 2013 for an estimated 1.6 million students and recent graduates.

Daniel Indiviglio of The Atlantic put together an interesting report that calculates the impact of the president’s proposals:

Consolidation: The first would clearly be the most significant [impact], because it is aimed at helping more student loan borrowers. How much would an interest rate reduction of up to 0.5 percent affect payments?

For the average borrower, the impact would be small. In 2011, Bachelor’s degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.

Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn’t going to save the economy