Wednesday, October 26, 2011

Sticking it to America, one more time

I'm furious to read about President Obama's latest education 'initiative' - one that's likely to cost the already overburdened American taxpayer untold billions of dollars.

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 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.

There's more at the link.

So 'Suzi Creamcheese' can study 'Queer Musicology' or 'The Phallus' (not to mention underwater basket weaving), and run up tens of thousands of dollars in student loan debt . . . only to have you and I, the taxpayers of America, made responsible for her debts, all because President Obama is looking for any issue - anything at all - that he can use to gain support for his re-election. The fact that student loans have become a trillion-dollar nightmare, and college and university education have become a bubble almost as bad as the recent housing bubble, are all factors that make this even more ridiculous and unsupportable - let alone unsustainable.

I guess it sucks to be one of the (seemingly few) responsible citizens of America - at least, it sucks under this Administration . . . We'd better do something about that in 2012!



eriko said...

So the school that I went did not have underwater basket weaving but someone did do a contract on underwater violen playing.
It turns out to actually be pretty impressive. They had to figure out how to build a violen and bow that would actually play under water and then figure out how to get a good recording without having to frequency shift it. Oh and compose something that would sound nice.

Actually this seem like a gift to the banks under the disguise of pandering to Occupy. The former students will pay less not and the debt will grow meaning they will pay more in the end.

Anonymous said...

Vote buying anyone? One analysis of the program says it will 'save' a grad less than $10 per month.

HeroHog said...

Closet Zappa fan? I love it!

Formynder said...


Except that most of the student loans are given directly from the government, the old policy of having the government insure loans under a program for the banks was centralized after 2008.

Even if this ends up not costing taxpayers more money, I see one immediate consequence that of fewer student loans being made available.

eriko said...

Yep you are right this only effects .gov issued loans.

Jim March said...

Part of the credit bubble prior to the 2007 collapse involved a major ramp-up in the student loan programs. And yeah, some kids got "degrees" in stuff like "Lesbian Hispanic Studies" or somedamnthing. But not all of 'em.

Knowing that credit was now much easier, state governments pulled funding from the colleges and universities knowing that student loans could make up the difference. And then in 2006, suspecting that a bubble was forming, student loans became ineligible for bankruptcy proceedings.

What the "Occupier kids" are now complaining about is that first, taking on all that debt for a degree was necessary due to government decisions (true), and that no "bankrupcy out" is available to them when even more obvious "bailouts" are available to the super-rich and esp. the big banks (also true).

So...yeah, actually, they have a point...well, except for the ones that went for the silliest possible "degrees". Esp. when you consider that the total US student loan debt is now higher than the entire US personal credit card debt.