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Is Student-Loan Forgiveness Obama's Next Crisis?
IBD Editorials ^ | October 26, 2011 | Editor
Posted on October 26, 2011 9:09:05 PM EDT by Kaslin
Government: President Obama wants student loans to be more like student handouts. Too bad he hasn't learned one of the lessons of the 2008 mortgage crisis: Free money costs plenty.
The global financial crisis has its roots in the U.S. government's politicization of mortgages. Washington decided that all those real-life versions of mean old bank president Mr. Potter from "It's a Wonderful Life" shouldn't just turn into big-hearted Jimmy Stewarts.
No, they should practically become welfare officers, doling out money to people with bad credit ratings to buy homes, without requiring a down payment.
And when this pyramid scheme collapsed, the investors who bought the safe-seeming, sliced-and-diced mortgage debt were left holding the bag.
And millions of Americans lost their jobs.
Making a loan of hundreds of thousands of dollars to someone is serious business, but the government for years systematically pressured mortgage lenders with accusations of racism. Many feared the Department of Justice more than the default risk of their debtors.
Now President Obama proposes applying the same mortgage mistakes to student loans.
On a day on which the College Board reported the cost of public colleges rose 8% — about twice the inflation rate — Obama unveiled a student loan forgiveness plan.
(Excerpt) Read more at investors.com ...
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Dude!!!.... this move is an OUTRIGHT attempt at winning those OWS votes ;)
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Dude!!!.... this move is an OUTRIGHT attempt at winning those OWS votes ;)
it's another Obama ponzi scheme.
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it's another Obama ponzi scheme.
factually, yes.
politically? i think i read 43% of americans support the OWS movement, and only 29% of people disapprove?
Obama is giving them what many want - and repubs are on tv calling them names and mocking them.
Who will they work for, and vote for, in the 2012 elections?
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factually, yes.
politically? i think i read 43% of americans support the OWS movement, and only 29% of people disapprove?
Obama is giving them what many want - and repubs are on tv calling them names and mocking them.
Who will they work for, and vote for, in the 2012 elections?
43%? It's quite a bit lower than that, slick.
Gallup has it at 22% and they're really the only polling service worth a damn.
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Yeah..43%...I think most people could care less. Do any of these people look like normal people.....certainly not anybody from fly-over country that Ol barry is going to need to keep his job.
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43%? It's quite a bit lower than that, slick.
Poll: 43 percent agree with views of "Occupy Wall Street"
http://www.cbsnews.com/8301-503544_162-20125515-503544/poll-43-percent-agree-with-views-of-occupy-wall-street/
"Forty-three percent of Americans agree with the views of the "Occupy Wall Street" movement, according to a new CBS News/New York Times poll that found a widespread belief that money and wealth should be distributed more evenly in America.
Twenty-seven percent of Americans said they disagree with the movement, which began more than a month ago in lower Manhattan and has since spread across the country and around the world. Thirty percent said they were unsure.
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Poll: 43 percent agree with views of "Occupy Wall Street"
http://www.cbsnews.com/8301-503544_162-20125515-503544/poll-43-percent-agree-with-views-of-occupy-wall-street/
"Forty-three percent of Americans agree with the views of the "Occupy Wall Street" movement, according to a new CBS News/New York Times poll that found a widespread belief that money and wealth should be distributed more evenly in America.
Twenty-seven percent of Americans said they disagree with the movement, which began more than a month ago in lower Manhattan and has since spread across the country and around the world. Thirty percent said they were unsure.
"Gallup has it at 22% and they're really the only polling service worth a damn."
And from your own link:
"Americans were more reticent to offer an opinion: 25 percent said they had a favorable impression of the movement"
43% of Americans may agree with the movement but that doesn't mean 43% agree with Obama's moves to fix the economy. Your straw man arguments fucking suck.
Because your reading comprehension skills are indicative of your French Fry U MBA, let me point out that "agreeing with the views of a movement =/= you support it", as evidenced by your own article.
By the way, will this loan plan of Obama's get anyone a job? Nope. How many people will remember this next year when unemployment is still over 9%? Not many.
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so all OWS has to do is explain to the other 1/5 of americans that they represent the views that these folks already agree with. Check.
Denial. I think repubs are in it. they're shitting on a movement that a lot of people agree with. dems are embracing it. let's see how that works in 2012.
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so all OWS has to do is explain to the other 1/5 of americans that they represent the views that these folks already agree with. Check.
Denial. I think repubs are in it. they're shitting on a movement that a lot of people agree with. dems are embracing it. let's see how that works in 2012.
What views? I thought you claimed that there are a hodge podge of viewpoints in this movement? They've even said they have no unified theme. Stop contradicting yourself in an attempt to build your straw man.
25% of Americans approve of it. Obama can embrace it all he wants. Not going to save him from another year of 9%+ unemployment and zero economic growth.
Your shilling for Obama has gotten embarrassing. You're not capable of worming your way around this without exposing yourself for the biased little fanboy you are.
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240 picks up the tsp for this nonsense?
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240 picks up the tsp for this nonsense?
i simply pointed out Obama has now worked to win favor from a group whose beliefs are matched by 43% of americans and only hated upon by 27%.
He's on the right side of the OWS. Repubs are on the wrong side.
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i simply pointed out Obama has now worked to win favor from a group whose beliefs are matched by 43% of americans and only hated upon by 27%.
He's on the right side of the OWS. Repubs are on the wrong side.
LOL. he already has those 43 percent moron!
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i simply pointed out Obama has now worked to win favor from a group whose beliefs are matched by 43% of americans and only hated upon by 27%.
He's on the right side of the OWS. Repubs are on the wrong side.
Not surprisingly, you don't get it. The 43% number is irrelevant. That 43% contains libertarians, democrats, republicans, anarchists and so on (and a lot of people who disagree with Obama as Douglas Schoen's polling of the OWS crowd in NYC showed). While they may agree with the VIEWPOINTS being represented by OWS, it doesn't mean that they agree with Obama's solutions to it. So either post a poll showing THAT or stfu.
You think the "End the Fed, kill big government" crowd that shares some of these viewpoints are aligned with Obama and his solutions? Not a chance.
Go ahead and lie to us again about how much you like Ron Paul. You're an Obama drone, you've been an Obama drone and in November 2012 you'll be an Obama drone.
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LOL. he already has those 43 percent moron!
1. Do you think 43% of americans agreed with those ideals a month ago?
2. Do you predict this 43% number will go UP or DOWN in the next month?
IMO, kinda like you refuse to admit the tea party has lost just a bit o momentum since nov 2010... you;ll never be able to admit when these OWS clowns mmake progress.
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1. Do you think 43% of americans agreed with those ideals a month ago?
2. Do you predict this 43% number will go UP or DOWN in the next month?
IMO, kinda like you refuse to admit the tea party has lost just a bit o momentum since nov 2010... you;ll never be able to admit when these OWS clowns mmake progress.
You keep trying to make the argument that the 43% of the people who agree with the viewpoints of OWS also support Obama and his solutions when this is anything but the case. Can you substantiate that or are you just making up claims to defend your God-King again?
And last I checked, 43% is a not a majority.
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this is another ponzi scam!
Kids run up massive debt, schools ca jack tuitions to kingdom come, and taxpayer at the end gets fucked!
obama = madoff.
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Is Student-Loan Forgiveness Obama's Next Crisis?
IBD Editorials ^ | October 26, 2011 | Editor
Posted on October 26, 2011 9:09:05 PM EDT by Kaslin
Government: President Obama wants student loans to be more like student handouts. Too bad he hasn't learned one of the lessons of the 2008 mortgage crisis: Free money costs plenty.
The global financial crisis has its roots in the U.S. government's politicization of mortgages. Washington decided that all those real-life versions of mean old bank president Mr. Potter from "It's a Wonderful Life" shouldn't just turn into big-hearted Jimmy Stewarts.
No, they should practically become welfare officers, doling out money to people with bad credit ratings to buy homes, without requiring a down payment.
And when this pyramid scheme collapsed, the investors who bought the safe-seeming, sliced-and-diced mortgage debt were left holding the bag.
And millions of Americans lost their jobs.
Making a loan of hundreds of thousands of dollars to someone is serious business, but the government for years systematically pressured mortgage lenders with accusations of racism. Many feared the Department of Justice more than the default risk of their debtors.
Now President Obama proposes applying the same mortgage mistakes to student loans.
On a day on which the College Board reported the cost of public colleges rose 8% — about twice the inflation rate — Obama unveiled a student loan forgiveness plan.
(Excerpt) Read more at investors.com ...
::)
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Vince - where does money come from?
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Vince - where does money come from?
Where the rest of the $1+ trillion deficits came from: thin air.
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This is really insane on so many levels when you think about it.
Obama is a crack head who should be in jail.
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Vince - where does money come from?
Doesn't matter. There's been no reports of a School Loan Forgiveness plan going into effect. This is more than likely an idea from a think tank.
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Obama's Student-Loan Order Saves the Average Grad Less Than $10 a Month
By Daniel Indiviglio
Oct 26 2011, 12:53 PM ET 165
http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-action-wont-have-much-impact/247411
The monthly impact of the president's new effort for most Americans paying off college debt will be between $4 and $8
Of the many long-term problems the U.S. economy faces, student loans are a big one. Education costs are rising very quickly and incomes aren't. As a result, students will have to borrow more and more money to obtain university degrees and will have a tougher time paying their loans. President Obama seeks to respond to this question with an executive order in the next part of his "We Can't Wait" unilateral stimulus effort. While the president's heart may be in the right place, his effort isn't like to have much impact.
The Problem: Student Loans' Crazy Growth
The cost of college is growing rapidly. That wouldn't be a problem if incomes were growing as quickly as tuition and fees. They aren't. In order to cope with the growing expense of college, more students are relying on bigger loans. The chart below demonstrates the problem pretty clearly:
You can see that student loans have grown by 511% since 1999. Meanwhile, disposable income has grown by just 73%. As this chart also shows, most outstanding student loan debt (82%!) was accrued by students over just the past decade.
Obama's Executive Orders
The president seeks to make the situation a little bit easier for some of those graduates. He will create an executive order that has three components.
•He will clear the way for borrowers with direct government loans and government-backed private loans to consolidate their balances. The White House estimates that this will cut the effective interest rate on student loans by up to 0.5%.
•He will limit the amount of student loan payments to 10% of a graduate's income. (Currently, the limit is 15%.)
•He will allow debt still outstanding after 20 years to be forgiven. (Currently, forgiveness occurs after 25 years.)
Those last two orders are really just the president moving up the timeline of existing legislation. Both changes are set to go into effect in 2014, but the president will order that they go into effect as of 2012.
The Impact
Let's consider the impact of each of these orders.
Consolidation
The first would clearly be the most significant, because it is aimed at helping more student loan borrowers. How much would an interest rate reduction of up to 0.5% affect payments?
For the average borrower, the impact would be small. In 2011, Bachelor's degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.
Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn't going to save the economy. While borrowers with bigger balances would save more, this is the average. And even someone with $100,000 in loans would only cut their monthly payments by $28.50.
Payment Limits
As mentioned, the government already has a program for borrowers to reduce their student loan payments to a ceiling of 15% of their income. At this time, just 450,000 borrowers are participating. Clearly, all of those participants would benefit from lowering the max payment to 10%. But how many others would?*
Student loan balances have really only ballooned over the past decade. So this change would affect very few Americans over the age of 32. For the young adults who it may effect, we must remember that educational attainment has some correlation to income. Those with the most debt will have attended business school, medical school, or law school. Most of those people will also have higher incomes, making them ineligible. For a person with the average student debt load, their annual income would need to be lower than $32,000** to qualify. The average income for Bachelor's degree holders aged 25 to 34 is $40,100.
Loan Forgiveness
Of all these parts of Obama's executive order, the loan forgiveness aspect will have the least impact. By moving the timeline from 25 to 20 years, it could be significant in the long run -- but it won't be felt for decades. Remember, 82% of the current student loan debt outstanding was accrued in just the past decade. So it will be at least another 10 years before any of those borrowers have hit the 20-year mark in their student loan payments.
Can an Executive Order Really Do This?
Some opponents of excessive executive power may question whether an executive order can really even accomplish these ends. The president is ordering a policy change for loan consolidation and changing the implementation date for previously passed legislation. Either of these actions could make for a really interesting court challenge, as both appear to stretch the limits of what an executive order was designed to do -- shouldn't Congress order such changes?
In practice, however, the orders will probably go through without challenge. First, it isn't clear that anyone who has standing to bring such a case to court would do so. The first measures may cost some private lenders some interest revenue, but they need to keep a conciliatory relationship with the government. The latter two measures would cost taxpayers. And even if such a challenge was brought, it could take the court a year or two to provide a final verdict. By then, unless a judge grants a temporary injunction, consolidation would already have occurred for most interested borrowers and the legislation's stated implementation date would already be past for the latter two aspects of Obama's effort.
By calling for these measures, President Obama seeks to respond directly to young Americans stressed about their student loans. Indeed, one of the vague objectives of the Occupy Wall Street movement is for student debt forgiveness. But from a practical standpoint, these executive orders won't have much of an impact. To take on the student debt problem more aggressively, the president would need some actual legislation that would shake the fundamental framework of the student loan system.
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*Note: White House estimates that this provision could reach 1.6 million borrowers. That's considerably more than 450,000, but the provision still aims assistance to a select group struggling the most with their student loans. For those borrowers, the savings could be more significant than the consolidation savings.
**Note 2: Initially, I calculated this to be $25,000. But I refined my analysis and a better estimate would be closer to $32,000. Again, the program still won't help the average borrower, but those will relatively low incomes and relatively high student loan debt could benefit.
Image Credit: Sterling College flickr
Vince the Sham Wow shill is proud
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Krauthammer: If Students Knew Truth Of Loan Plan, Obama Would've Been "Laughed Out Of Auditorium"
Related Videos | expand Playing krauthammer if students knew truth of loan plan obama wouldve been laughed out of auditorium
"It's entirely incoherent," Charles Krauthammer said of Obama's plan to pay down student loans. "I'm not sure if those savings are real, where are they? What he spoke about today was tweaking the student loan program, which he now controls. In a way, it's rather astonishing. The numbers were run by an economics correspondent today in The Atlantic magazine. And It turns out what he is offering the students is between $4.50 and $7.70 a month of relief."
Now these are students that he addressed today and spoke about their carrying an average of $25,000 in loans. So what he's saying is 'I'm going to save you, I'm going to give you a quarter of a part of it back a month. This is keeping with all of the promises he has been making in the last campaign tour in which he promised relief to homeowners in a program which has already failed. And now he is doing it on student loans. If his audience had known how minuscule is the benefit, he would have been laughed out of that auditorium.
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Only the most idiotic moron could support obama at this point. What a freaking sham.
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Obama took lesson from Vince.
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White House Student Loan Measures Will Barely Dent Soaring Costs [ Costs soar under Obama ]
cnbc ^ | Oct 26 2011 | By: Scott Cohn
[snip] Tuition and fees at public four-year colleges and universities jumped 8.3 percent nationwide for the 2011-2012 school year, the organization said. The numbers were skewed by California, which raised in-state tuition and fees by a whopping 21 percent this year. But even without California, costs rose seven percent, according to the College Board’s annual “Trends in College Pricing” report released on Wednesday.
[snip]
Private, non-profit colleges raised prices as well according to the report, but not nearly as much as their budget-strapped public counterparts. Tuition and fees rose 4.5 percent, which is still more than twice the core rate of inflation.
“Private institutions don’t rely on state budgets for funding,” Baum told CNBC.
[snip]
The new Obama administration measures—which the White House says do not need Congressional approval—are aimed at lowering payments for millions of borrowers.
Beginning next year, an existing program that allows borrows to base their monthly payments on a percentage of their income will be enhanced. Under the current “Income-Based Repayment” program, borrowers can limit their payments to 15 percent of their income, with the ability to have the balance of the loan forgiven after 25 years. Under the new program, the cap will drop to ten percent, forgivable after 20 years.
(Excerpt) Read more at cnbc.com ...
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OBAMA = LYING SCAMMING KENYAN MARXIST COMMUNIST NEO-TERRORIST SLEEPR CELL POTUS
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Obama Taps Taxpayers For Student Stimulus
By Chris Stirewalt
Published October 26, 2011
| FoxNews.com
Obama Taps Taxpayers For Student Stimulus; Romney’s Nuance Doesn’t Thrill on Hill
Obama Looks to Wring Stimulus From Saturated Student Loan Market
“$1 Trillion”
-- Estimated amount of student loan debt owed by Americans.
In keeping with his new campaign theme of “we can’t wait,” President Obama today will roll out a plan to put more money in the pockets of some of the nation’s 36 million student loan recipients.
Obama has broad latitude in this area – certainly broader than the first two parts of his western campaign trip, underwater mortgages and subsidies for hiring veterans – because one of his early legislative initiatives was to have the federal government take over the student lending business in America.
Obama argued for the measure in 2009 as a cost-savings initiative, saying that the old system of privately issued, government secured loans reduced the amount of available money for needy students and also prevented the feds from making the system more efficient.
But Obama is now seeking to use that new power to obtain a taxpayer-financed stimulus that Congress won’t approve. The idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years.
Take this example: If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.
Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.
The president will also allow student debtors to refinance and consolidate loans on more favorable terms, further decreasing the payoff for taxpayers.
Obama’s move comes at a moment when many economists are warning of a college debt bubble that is distorting college tuition rates and threatening to further damage credit markets. The president’s move is intended to make college more affordable for more people, which will, in turn allow universities to jack up their rates.
As in the housing bubble, cheap credit on easy terms increases the amount of money chasing the product (in this case a diploma) allowing schools to increase prices. This inflation makes it harder for middle-class families to afford paying their own tuitions, driving them into the government financing program, which, you guessed it, drives up costs further still.
Obama’s goals, aside from continuing to encourage young people to spurn the private sector in favor of service jobs, is to try to juice the economy. Those who participate in the program could see their monthly incomes rise by hundreds of dollars, thereby increasing the money they have to buy stuff and try to juice the economy.
A more modest program already in place has been a bit of a bust with only 1.25 percent of debtors signing up, likely because of the unpleasant notion of additional paperwork and government reporting hassles. But by sweetening the deal and putting a big PR push behind it, Obama is betting that he can get people spending in time to help shore up his re-election chances.
The best part for Obama is that he can obligate the Treasury without Congressional approval thanks to the passage of what he described as a cost-saving measure in 2009.
Update: White House Responds
A White House official responds to Power Play, saying that the president's student loan action will "almost certainly reduce" deficit spending because of the savings the administration says will be achieved by a 2010 federal college lending takeover and what the administration believes will be a lower rate of default among student debtors due to lower lending rates.
The official also stressed that the loan program is only an expedited version of the forgiveness and refinancing rules enacted by President Obama and congressional Democrats in 2010. The original law calls for the end of participants’ obligations after 25 years and caps payments at 15 percent of a debtor’s income above the poverty line.
That legislation, passed in the Senate as a rider on the president’s health law in order to use the reconciliation process that requires 50 votes instead of the usual 60 votes due to bipartisan opposition, was promised to reduce federal outlays by $68 billion over the next decade, monies which were earmarked for cost savings and an expansion of the Pell Grant program for needy college students. The funds for the stimulus endeavor announced by the president in Denver on Wednesday are said to be drawn from that cache.
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Risk-Averse Romney Frustrates Hill GOPers
"I am not speaking about the particular ballot issues. Those are up to the people of Ohio. But I certainly support the efforts of the governor to reign in the scale of government. I am not terribly familiar with the two ballot initiatives. But I am certainly supportive of the Republican Party's efforts here."
-- Former Massachusetts Gov. Mitt Romney walking back his prior support of a new Ohio law that restricts the collective bargaining power of state worker unions.
While former Massachusetts Gov. Mitt Romney has done a better job of wooing Capitol Hill Republicans than his fellow GOP 2012 contenders, there’s still a resistance to the man who has been the party’s frontrunner for most of the past three years.
Romney heads to the Hill today to try to corral supporters from two groups – more moderate members who are natural fits for Romney and a few conservatives to vouch for a nominee they can accept as the inevitable choice.
It’s been a hard sell.
“If he’s inevitable, I don’t know why he needs my help,” one swing-state Republican House member told Power Play. “I’ll endorse the nominee, whoever that is.”
Members and staffers agree that while Romney looks increasingly unbeatable since the party’s conservative base remains divided, there’s little to be gained from jumping on board early.
“If you endorse [Romney], you upset the base at home and don’t really get anything in return,” a former senior Senate staffer who now works as a GOP campaign consultant told Power Play. “This is not one where you want to be seen as ahead of the curve.”
A closet Romney backer in Congress who said she is soon to announce her support publicly told Power Play that the frontrunner would continue to roll out a series of high-profile endorsements in the days and weeks to come.
“We respect results and we respect experience,” he said. “We also know that it will take practical solutions to do the job.”
Romney made his task more complicated on Tuesday when he flinched when questioned about a pair of state ballot initiatives while visiting a Republican campaign office where they were working hard to pull out wins on the referenda.
Romney issued a statement this summer in support of the law pushed by Gov. John Kasich to roll back the collective bargaining powers of state worker unions, but when asked in person about the union-led effort to repeal the law through a plebiscite, Romney was agnostic on the subject deferring to the will of the voters.
Many have attributed this to Romney’s unwillingness to be attached to the losing side of the issue since polls show lopsided support for the union-backed repeal measure. Others have speculated that Romney was looking to avoid connection to the anti-government union movement inside the GOP, an association that could be damaging to a candidate whom Democrats are already painting as a plutocrat uninterested in the plight of blue-collar workers.
More likely, though, it was the other issue on the ballot: A constitutional amendment that would shield Ohioans from the key provision of President Obama’s health law that requires all Americans to either purchase private insurance or be enrolled in a government program.
Romney, who pioneered the concept of mandatory insurance in Massachusetts, can hardly speak in favor of the Ohio amendment, which looks likely to pass. He has held that states should be allowed to compel citizens to buy insurance, but not the federal government and that each state should do as it wishes on the subject.
If Romney expressed an opinion on the union rule, he would be hard pressed to then express agnosticism on the mandatory insurance provision. By ducking the question, Romney protected himself from having to talk about his health law and, perhaps, avoided an even bigger embarrassment than what followed.
Romney’s answer was therefore technically the politically correct one since it traded a small embarrassment for a larger gaffe, but it is exactly that kind of calculation that continues to leave GOP activists cold. Romney avoids the gaffes that have plagued Herman Cain, Rick Perry and even occasionally Newt Gingrich.
By giving such careful answers, Romney has been able to maintain his quarter of the GOP electorate, but hasn’t been able to rebut the central critique of his candidacy: ideological inconstancy.
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And Now, A Word From Charles
“I think this is the beginning of his re-launch and his last chance for a re-launch. What's surprising is that he didn't start with this. He thought he could start the campaign defining himself as a guy that created jobs in Texas. That is not enough. That is a bit of a narrative, but it's not a program.
When Reagan ran in 1980 he had a program. He wasn't only running against stagnation and Carter and malaise, he ran on a guy who is going to the Kemp-Roth tax cuts, which were radical, one-third cut, which was a major cut.”
-- Charles Krauthammer on “Special Report with Bret Baier.”
Read more: http://www.foxnews.com/politics/2011/10/26/obama-taps-taxpayers-for-student-stimulus/#ixzz1c0575per
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LOL!!!
Obama doesn't know what to do at this point. He is just hoping that enough people buy into his scam, bait and switch routine. What a sad sight. Two weeks he was pandering to the latinos, now it is the impressionable college student.
The scary thing is that a lot of those college students and latinos might be stupid enough to fall for it.
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This is subprime all over again - just for school loans! ! ! !
I'm not kidding - Obama is so hopelessly ignorant and dumb its not even funny any more.
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Great news: Obama’s student-loan changes puts $8 in borrower pockets per month
http://hotair.com/archives/2011/10/27/great-news-obamas-student-loan-changes-puts-8-in-borrower-pockets-per-month/ ^
In trying to contrast himself with a supposedly balky Congress, Barack Obama has rolled out the first two in a series of unilateral executive actions to “heal this economy.” The first attempted to rescue homeowners from foreclosures by refinancing mortgages that are, er, current with their payments. The second adjusted caps on student-loan payments in an effort to give college graduates more money to spend each month. More disposable cash means more spending, which in a consumer-driven economy means growth … right?
In theory, yes. But buying an extra four Slurpees a month probably won’t cut it.
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http://www.huffingtonpost.com/2011/10/27/obamas-student-loan-plan-_0_n_1034753.html#comments
LMFAO @ insanely dumb most liberals are.
They create a problem, it blows up, and then want to come in after the fact with an even worse "solution" that helped create the problem in the first place.
F'ng Idiots.
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PETER SCHIFF: Obama's College Tuition Plan Will Prop Up Bloated Schools
Peter Schiff, Euro Pacific Capital | Oct. 27, 2011, 5:16 AM | 926 | 14
Peter Schiff
URL Peter Schiff is the president and chief global strategist of Euro Pacific Capital
President Obama yesterday announced a plan that will ensure students are able to commit to higher levels of federally backed student loans.
By limiting student obligations to repay, and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuitions at a rate that outpaces nearly every other cost center in the American economy.
The move will come as a great relief to an education establishment increasingly concerned that students might no longer be able to afford skyrocketing tuition rates.
The AP reported today that state support for higher education has fallen 23% after accounting for inflation over the last ten years, even as tuitions have risen 5.6% faster than CPI. This gap has been bridged by a whopping 57% increase in federal student loans over the same time period due to the increased cost of tuition and number of student enrollment.
The Obama plan limits repayment obligations on those federal loans to just 10% of "discretionary income" which it defines as total income above 150% of the federal poverty level - currently translating to about $16,000 for an individual, or $33,500 for a family of four.
The plan also limits the term of obligation to 20 years. These terms represent a substantial easing and acceleration of the terms in Obama's "Pay as You Earn Plan," which was just announced last year (see my April 2010 response to that plan).
That plan, which was scheduled to begin in 2014, represented the first time the government had imposed any limits on repayment obligations. It had capped repayments at 15% of discretionary income for 25 years.
Assuming that a successful college graduate would earn, on average, $80,000 per year over the course of the 20-year obligation period, the repayment burden under the new plan will total somewhere around $4,500 per year, or $90,000 for the life of the loan. A less successful graduate who earns say $50,000 per year, on average over the 20-year obligation period, would have a repayment burden of just $1,500 per year, or just $30,000 over the life of the loan.
Any loan amounts above those totals will be forgiven. As a result, students need not fear the inability to repay large loans. They need not worry about future interest rate increases, which could raise their payments. More importantly, students will feel diminished pressure to obtain high paying jobs. In fact, the less a graduate earns, the greater the amount of loan forgiveness.
For the majority of students, who don't become very high earners, it will make little difference if loan amounts are $90,000, $180,000 or even more. As the repayment burden will be capped to a percentage of average income, loan repayments will be the same for any loan beyond a certain threshold. These policies could remove all barriers for larger and larger loans, which will then allow universities to charge higher and higher tuitions. This will permit them to maintain their bloated administration infrastructures and will allow them to continue loading up their campuses with even fancier facilities such as gymnasiums, performing arts centers, food courts, and health centers.
The day of reckoning in which the higher education system would have had to offer programs that fit into the budget of average Americans has been postponed, if not entirely eliminated. Of course the losers in this new arrangement will be American taxpayers who will be on the hook for the unpaid balances. Recently, college loan debt passed credit card debt as the largest, non-mortgage, source of debt in the United States.
The balance of these unpaid student loans will be thrown onto the pile of America's escalating unfunded debt. Of course, the moral hazard implicit in the program means these liabilities will now pile up even faster. In addition, the program substantially increases the interest rate risk to which taxpayers are already over-exposed due to the short maturities of the national debt. The higher student loan interest rates rise, the larger the unpaid balances that taxpayers will be forced to assume.
Obama's move is likely to set off a student loan forgiveness arms race in which politicians may continue to ease and cap loan repayment obligations. With nearly a trillion dollars of outstanding college debt rapidly increasing, debt forgiveness for the young could be the political equivalent of protecting social security for the elderly.
If college students were willing to rack up this much debt under the assumption they would have to actually pay it back, imagine how much debt they will be willing to amass now that they realize they do not? As a result, expect college tuition increases to not only continue but to accelerate. In a way, Obama would be turning higher education in to a third-party payer system (not too dissimilar from our current health care system - which is also characterized by outsized cost increases).
Under this new system, colleges might charge whatever they want because their customers simply turn the bill over to the U.S. taxpayer who has no say in the transaction. Under such a system what incentive would a kid have to live at home and go to a community college? Why not attend the most expensive university that taxpayer money will allow? I suppose Obama was so impressed with how this dynamic works with health care that he decided education could use some of the same medicine.
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Gingrich calls Obama student loan proposal a 'Ponzi scheme'
The Hill ^ | 10/28/11 | Justin Sink
Posted on October 28, 2011 10:10:29 AM EDT by Libloather
Gingrich calls Obama student loan proposal a 'Ponzi scheme'
By Justin Sink - 10/28/11 08:15 AM ET
Newt Gingrich said that President Obama's recently announced student loan proposal was a "Ponzi scheme."
Obama's plan would allow for easier consolidation of outstanding student loans, and would forgive outstanding balances on federal loans after 20 years of payments, rather than 25. Federal loan repayments would also be capped at 10 percent of a borrower's income, lowering payments, down from 15 percent now. The president would also begin implementing the changes next year, rather than 2014 as was currently planned.
But Gingrich says that Obama's plan lies to students "by promising to every young person, 'You won't have to pay off your student loan as a student." Instead, the former Speaker of the House says that those who benefit from the program will just "have to pay off the national debt" as taxpayers later in life.
He went on to say that the proposal was "a Ponzi scheme even by Gov. Perry's standards."
Gingrich was speaking at an education forum in New York attended by a number of Republican candidates.
Michele Bachmann also criticized the plan at the forum, saying it created a "moral hazard."
"There is a morality in keeping our financial promises, and I don't think we should push that off onto the taxpayer," Bachmann said. "The individual needs to repay and be responsible for repaying their student loan debt."
The Minnesota congressman also echoed comments by Speaker John Boehner (R-Ohio), who said Thursday he was concerned about the constitutionality of the administration's decision to change rules without congressional approval.
"I believe it is abuse of power from the executive to impose via an executive order a wholesale change in the student loan," Bachmann said.