Unless you are living under a rock, you know Obama, desperate for votes, recently announced plans to make changes to the student loan program which they had already tampered with in 2009. What we are witnessing is an attempt by the left to create an equivalent system that they use to scare senior citizens into voting for them – Social Security – for the young generation. Have no doubt that anything they do, as has been the problem with every damned policy they have enacted in the last 3 years, will do very little to address the problems with student loans and the cost of a higher education, but will guarantee that the tax payer will be on the hook for a fortune at some future point. Andrew Gillen has a great post dealing with why this thing is a disaster:
The Income Based Repayment (IBR) program, which took effect in 2009, is designed to lighten the student-loan burden for some students. The basic idea is to limit monthly payments to less than 15% of disposable income. If a student makes these payments for 25 years, any remaining balance is forgiven, meaning that taxpayers essentially pay the rest off. President Obama just announced his intention to lower this to 10% of disposable income and 20 years of repayment before forgiveness. These proposed changes, as well as IBR in general, are bad for the following 6 reasons.
In short, IBR was basically shifting a huge chunk of the massive debt these idiots are straddling themselves with to the tax payers, and the proposed changes are going to make the amount shifted even larger. Of course, the CBO will score this whole thing as a win since they only look at a 10 year window, and as set up the first impact of this idiotic policy will only start, if in desperation they don’t drop the repayment period even more, 2 decades from now. But have no doubt that what we have here is another case of a politically motivated vote buying scheme that does absolutely nothing to address the real problem – the out of control cost of education because of government enforced subsidization – and will create a problem akin to the housing market bubble burst we just had for the politicians and tax payers that are stuck with this asinine program.
Student loan debt is over $1 trillion and surpasses credit card debt in America. It’s not going to do anything but bigger. We are all going to get hammered by this, and the same collectivist politicians will then again blame it on the evil rich and banks, not government. Sound familiar? It should be, because this plan is yet again a case of plain and simple social engineering, and we all saw how well that has been working for us so far. Even more preposterous is how the damned thing is put together to encourage the very students that are most likely to take on the largest possible amounts of debt pursuing the most idiotic and meaningless types of degrees, from not only shifting most of their debt to the future tax payers, but to join government.
While regular people need to make payments for 25 years before loan forgiveness, borrowers who take a job in the public sector or with some non-profits have their debt forgiven after 10 years rather than 25. The message from the government is unmistakable – -we want you to get a public or non-profit job. Why does the government think it knows best where people should be employed or if such public service jobs provide more value to society than private sector ones?
I have to admit that these social engineers sure know how to rig the system in their favor. Must be that whole “the public sector is the growth sector” nonsense Biden was talking about. I however do not doubt that in the end this will result in something just as bad, if not worse, than the housing mess we also remain sure to get a repeat of sooner than later. The problem is that this mess is far from over. The entitled, those hippies and middle class idiots with “Studies” degrees and huge debt after 5 or more years of partying hard at college that predominantly make up the OWS types pretending to be protesting the evil rich, believe US tax payers should pay all of their bills.
Just like the refusal by the social engineers to get rid of the idiotic rules forcing lending institutions to give money to people that should never have even been considered or face the hefty federal government’s cudgel that caused the housing crisis, there is absolutely no chance these crooks will address the cost of education crisis. The out of control costs of an education, benefits one of their most vocal and important constituencies – the academics – and enriches people with some of the most idiotic and destructive set of ideas while totally insulating them from the consequences of reality. Academia is the refuge of the leftard politician. They have no interest in curtailing that boon. So instead they stick the tax payer with the bill, getting a lot of votes in the short term from idiots that don’t even realize they will pay for this cost sooner than later, and when the whole house of cards comes tumbling down, they will blame everyone but themselves. Thsi vote buying scheme comes in an hour of desperation, and it is going to do us mostly harm.
UPDATE: Another article pointing out how this is great politics, but won’t solve anything or help anyone:
But the president’s plan is a far cry from the kind of relief that the Wall Street protesters and other debtors are demanding, and it won’t do a thing to address the roots of their repayment struggles: rising tuition and high unemployment.
Last year the unemployment rate for college graduates under the age of 24 rose to 9.4 percent, the highest level in at least 15 years. Meanwhile, college tuition has continued its inexorable climb, reaching an average of $8,244 for in-state students at public colleges in 2011-12, and $28,500 at private four-year colleges, according to College Board figures released this week.
Another challenge: Next July the interest rate on student loans will double, to 6.8 percent, costing the average borrower thousands of dollars over the life of his or her loan.
With almost 10% unemployment and annual tuition costs skyrocketing, students are getting a bum deal. Doubly so with a ridiculous 6.8% rate on the way. WTF? No wonder they want to just have other people pay for their debt.
The Chronicle however, gets this wrong:
To be fair, there isn’t much Mr. Obama can do about the rising cost of college, which is driven largely by cuts in state appropriations and other factors outside his control. And student-loan interest rates are set by Congress. Mr. Obama has certainly tried to tackle unemployment, offering a sweeping jobs bill that could have put some borrowers to work. He just hasn’t been able to persuade Congressional Republicans to accept the bill’s proposed tax increases for wealthy Americans.
Yes there is something Obama could do: stop the existing government backed loans program completely. Kill that program, or limit it to schools that offer drastically lower rates, and watch all these schools charging insane amounts of money & living large, either reduce their costs or go the way of the Dodo bird.
The cost is insane precisely because schools assume they can charge whatever they want since someone else is then responsible for the money. When they have to compete or loans can be discharged in bankruptcy, without the US tax payer footing the bill, they will learn to swim or they will sink. When government stops wasting more of our money, the employment situation aught to get better too.