The biggest change since 1850 for universities. Proposed at Buffalo speech.

Obama proposed a ratings system to assess how hard colleges are working to keep down costs; federal aid would be based on a school's frugality ratings under a proposal that would require congressional approval.

A higher education is the single best investment you can make in your future," Obama told students in Buffalo, but the high costs and debt have become "a barrier and a burden for too many American families."

In addition to pressuring colleges over costs via a new ratings system, Obama said his plan has two other goals: encouraging schools to innovate and compete for students, and helping students manage their loan debts.

The plan calls on colleges to disburse student aid over the course of a semester, rather than as a lump sum at the start. Colleges would receive bonus money for the number of Pell Grant students who graduate.

As for the ever-growing levels of student debt, the plan calls for expansion of a "Pay As You Earn" program that would cap loan repayments at 10% of income.

The plan also says that colleges should offer a greater range of "affordable, high-quality options" that will generate competition with other colleges and drive down prices.

Obama pointed out that much of his plan — including the proposal to tie federal funding to the new ratings — would require congressional approval, and "we're going to have to work on that."