"Think about it. Over the next 10 years, nearly half of all new jobs will require education that goes beyond a high school degree," Obama said. "And yet, as many as a quarter of our students aren't even finishing high school."
He noted that the United States has fallen to ninth globally in the proportion of young people with a college degree.
"And so the question is whether all of us -- as citizens, and as parents -- are willing to do what's necessary to give every child a chance to succeed," he said.
The responsibility for children's educational success doesn't start in classrooms, but in homes and communities.
"It's family that first instills the love of learning in a child," Obama said. "Only parents can make sure the TV is turned off and homework gets done. We need to teach our kids that it's not just the winner of the Super Bowl who deserves to be celebrated, but the winner of the science fair; that success is not a function of fame or PR, but of hard work and discipline."
Schools should be places of high expectations and high performance, but many fall short, Obama said, which is why the government began a competition called Race to the Top.
"To all 50 states, we said, 'If you show us the most innovative plans to improve teacher quality and student achievement, we'll show you the money,'" he said. "Race to the Top is the most meaningful reform of our public schools in a generation. For less than 1 percent of what we spend on education each year, it has led over 40 states to raise their standards for teaching and learning. These standards were developed, by the way, not by Washington, but by Republican and Democratic governors throughout the country."
Race to the Top should be the path followed this year to replace No Child Left Behind with a law "that is more flexible and focused on what's best for our kids," he said.
"You see, we know what's possible for our children when reform isn't just a top-down mandate," he said, "but the work of local teachers and principals; school boards and communities."
After parents, teachers have the biggest impact on a child's success, he said. He said his administration wants to reward good teachers and "stop making excuses for bad ones."
Noting that in South Korea teachers are known as "nation builders," Obama said, "it's time we treated the people who educate our children with the same respect."
He also urged students contemplating a career to consider teaching because "your country needs you."
To compete globally, higher education must be within reach of every American, Obama said.
"That's why we've ended the unwarranted taxpayer subsidies that went to banks, and used the savings to make college affordable for millions of students," he said. "And this year, I ask Congress to go further, and make permanent our tuition tax credit -- worth $10,000 for four years of college. It's the right thing to do."
He also touched on immigration, noting hundreds of thousands of excellent students are not American citizens "who had nothing to do with the actions of their parents," or students of other countries who study in the United States.
"I am prepared to work with Republicans and Democrats to protect our borders, enforce our laws and address the millions of undocumented workers who are now living in the shadows. I know that debate will be difficult and take time," he said. "But tonight, let's agree to make that effort. And let's stop expelling talented, responsible young people who can staff our research labs, start new businesses and further enrich this nation."