Obama plans to accelerate a plan to cap student loan payments at 10 percent of income, bringing it forward to start in 2012 instead of 2014.
"Steps like these won't take the place of the bold action we need from Congress to boost our economy and create jobs, but they will make a difference," he said in a statement.
Obama will announce the student loan measure in Denver later today as he wraps up a swing through western states that will be vital to his re-election campaign in 2012.
The loans initiative will be the third such move by Obama in as many days, following action to aid homeowners and boost hiring of military veterans. The White House wants to show he is an activist president battling a "do-nothing" Congress.
The loan changes do not require approval by Congress.
Americans owe more on student loans than on outstanding credit card debt, and total loans outstanding are slated to exceed $1 trillion this year, according to the Federal Reserve Bank of New York. Outside of mortgages, student loans are the No. 1 source of household debt.
The White House estimates the loan changes could cut monthly payments for 1.6 million graduates.
Student debt will also be forgiven after 20 years, compared with 25 years under current law.
More than 36 million Americans have federal student loan debt, but only 450,000 have so far taken advantage of the existing income-based repayment program.
Obama will also make changes to allow 6 million students to bundle together certain federal loans to allow a single monthly payment, reducing the risk of default caused by juggling multiple debt obligations.
The option will be open from January and those that take it up will also get a 0.5 percentage point cut in the interest rate on some of their loans, lowering monthly payments and potentially saving them hundreds of dollars in interest.
"College graduates are entering one of the toughest job markets in recent memory, and we have a way to help them save money by consolidating their debt and capping their loan payments," said Secretary of Education Arne Duncan.
Last year, Congress passed a law that lowered the repayment cap and moved all student loans to direct lending by eliminating banks as the middlemen. Before that, borrowers could get loans directly from the government or from the Federal Family Education Loan Program; the latter were issued by private lenders but basically insured by the government. The law was passed along with the health care overhaul with the anticipation that it could save about $60 billion over a decade.
Today, there are 23 million borrowers with $490 billion in loans under the Federal Family Education Loan Program. Last year, the Education Department made $102.2 billion in direct loans to 11.5 million recipients.
Increases in federal aid have helped ease the burden on students dealing with tuition increases, the White House Council of Economic Advisers said in a report Wednesday.
"Despite large increases in the published price of college over the past four years, the average student has not seen commensurate increases in the net price of college, defined as the published price minus grants, scholarships and tax benefits," the report said.
Meanwhile, the Education Department and the Consumer Financial Protection Bureau announced a project Tuesday to simplify the financial aid award letters that colleges mail to students each spring.
A common complaint is that colleges obscure the inclusion of student loans in financial aid packages to make their school appear more affordable, and the agencies hope families will more easily be able to compare the costs of colleges.