The White House’s student debt proposal: How much will it help?

President Obama heads to Colorado this morning to tout a new proposal meant to ease the burden of student debt.

The plan, according to details released by the White House last night, essentially does two things: It allows borrowers to cap their loan payments at 10 percent of their income, a significant reduction from the 15 percent cap in current law. And the plan would allow for loan forgiveness on a remaining balance after 20 years of payments.

Right now, as my colleague David Nakamura reports, only 450,000 of the 37 million student loan borrowers take advantage of these payment caps. The White House estimates that 1.6 million Americans will take advantage of the new program.

In taking on student debt, the White House is going up against a big, and, in some ways, unprecedented challenge. Student loans have ballooned during this recession in a way they really haven’t during previous recessions. Here’s what that looks like in a chart, using data from the Federal Reserve Bank of St. Louis on total government consumer loans, including those from Sallie Mae, the main lending agency on education (the vast majority of these are student loans):

The past few years have clearly seen a spike in student borrowing. Part of this is probably due to the fact that the recession has sent some Americans back to school: Universities have continued to report more applications in the economic downturn. Couple that with the cost of tuition rising much faster than general inflation (more on that here) and it’s pretty easy to see why education borrowing has spiked.

As student loans spike, however, fewer borrowers are able to pay them back, even with annual caps and loan forgiveness provisions already in place. Education Department statistics show that defaults rose from 7 percent to 8.8 percent between 2008 and 2009, the most recent data available. Even for those who aren’t defaulting, the situation isn’t pretty: More than 25 percent become delinquent on their student loan payments, according to a separate analysis from the Institute for Higher Education Policy.

I’m still reaching out to sources to for reaction on how much this plan can do to stem our student debt crisis. But there’s one thing we already know for sure: The White House proposal is taking on a massive challenge with no easy solution in sight.