Tuesday, June 10, 2014

President Obama's Student Loan Forgiveness Proposal Explained in Simple Terms ... And My Contrasting and Simple Proposed "Debt Free" Solution

President Obama proposes to help more Democrats get elected in 2014 by forgiving more student loans and also reducing the interest rates on those loans. The future taxpayers will get the bill, but more on that later.

What he hasn't proposed is reducing the cost of attending college by limiting the cost of government subsidies. In other words, government subsidies, both direct grants and indirect grants such as Pell Grants and student loans, create funds for colleges which in turn enable them to raise tuition and related charges to sky high levels. They then use these additional funds  in large measure to increase compensation to college employees. You see, the free market with free customer choice doesn't apply to higher education in America. It's a government knows best 'thing.'

Thus, government backed, aka taxpayer, subsidies and guarantees, are currently being used extensively to make the cost of attending college prohibitively high for most taxpayers, students and their families alike. And it's all being done in the name of government helping the students. That's simply not true.

The facts are simple: the blank check endorsed by the taxpayers approach to college costs is politically created and has to change.

And so is the solution a simple one: We the People need to get the government knows best bureaucrats out of the way.

The Latest Student-Loan Charade says this in relevant part:

"You can tell an election is coming, because President Obama is promising more student-loan relief to young people who are growing less enthralled with his economic record. The latest exercise unveiled Monday is also supposed to make these young people forget the loan burden that earlier free lunches supposedly provided. The taxpayer losses will come on some other President's watch.

Specifically, Mr. Obama announced an expansion of the burgeoning disaster known as his Pay As You Earn program. This gift from taxpayers caps monthly student-loan payments at 10% of a borrower's discretionary income, regardless of how much the borrower owes. Even better, the borrowers have their debts entirely forgiven after 20 years—or merely 10 years if they work in government or nonprofits. Those who work outside the profit-making economy don't even have to report the forgiven loans as income. . . . 
The President also tried to help Democrats struggling to hold the Senate by endorsing still another expansion of student-loan subsidies. Majority Leader Harry Reid plans to hold a vote this week on Massachusetts Sen. Elizabeth Warren's bill to allow borrowers to refinance their old federal or private loans into new government loans at lower rates.

The Congressional Budget Office says the Warren bill would increase federal spending by $58 billion over a decade. But as CBO has repeatedly warned, its official scores by law must underrate the risk of defaults in such federal loan programs, so who knows what this latest election-year pander to young voters will ultimately cost. . . .

Which brings us to the common political secret of the Obama and Warren proposalsthey aren't aimed at aspiring college students hoping to matriculate but rather at former undergrads who are now suffering the economic hangover from Mr. Obama's previous policies. Thanks to a series of federal loan expansions supported by first Sen. Obama and then President Obama, student debt outstanding has nearly doubled since 2007 to more than $1 trillion.

A lot of these borrowers can't generate the income to service this debt, especially when so many of them can't get decent jobs. The left-leaning Center for Economic and Policy Research recently noted that among recent college graduates age 22-27, a full 45% were underemployed in 2013, meaning they were either unemployed or doing jobs that typically don't require a four-year college degree....

Democrats claim to care about inequality, but kids who don't go to college are in even worse economic shape than college kids, with even higher unemployment rates. Yet when the cost of defaults and debt forgiveness finally comes due, it will be paid by all taxpayers, including those who didn't go to college. So the townies with jobs will end up paying more in taxes to give former college kids and grad students a break on their student debt.


The Warren bill has no chance to pass the House, as Democrats know. The Warren bill and the Obama debt-forgiveness-by-fiat are attempts to change the subject from the cascading examples of government failure—the VA scandal (see nearby), the Taliban prisoner swap, the rising cost of health insurance under ObamaCare. In the Obama era, government failure is never a failure. It's another political opportunity to call for more of the same. "

Summing Up

Here's the deal.

A recent survey disclosed that 96% of political contributions from college employees go to support the election of Democrats. It's a "progressive thing."

And of course, public sector workers usually vote for Democrats, and the public sector unions to which they belong are huge financial backers of Democrats.

Accordingly, President Obama now proposes that for public sector employees any outstanding student loan balances would be forgiven after ten years. He proposes that private sector employees would have to pay for at least twenty years --- twice as long. In short, private sector workers are to be treated as second class or 50% citizens.

And here's an even bigger deal.

Expensive government failures always result in one sure thing --- calls for more taxpayer support and more expensive government knows best help and intrusion into the lives of all Americans.

And the future -- not the current -- American taxpayers are always the ones who are slated to get the shaft in the end. It's a political 'thing.' And those future taxpayers will get those remaining bills only after many of the current crop of elected officials, including the President, have left their elected offices, of course. That's the game.

But here's the biggest deal of all.

Former college students with jobs are taxpayers. So are  many of their fellow working high school classmates who didn't attend or graduate from college. Some of these jobs for both former college students and non-students alike will pay well, but many won't.

And that's because for both those former college students (graduates or not) and for their high school classmates who didn't attend college, the jobs market is tough. The economy is weak and job creating programs such as the Keystone XL Pipeline are left unapproved. Yet President Obama feels the young people's 'pain.'

Here's what I propose.

Let's get the government bureaucrats out of their present roles as 'all-knowing' experts and give the choice and power of college decisions directly to the students and their families. It's a 'voucher thing.'

Competition works. So does free choice. So will non-debt creating vouchers. Let's trust the American people.

And in so doing, we'll stop providing colleges with student signed and taxpayer endorsed blank checks.

Let's instead make vouchers a reality and cease and desist from taxpayer aided and abetted ever escalating college costs.

We the People deserve that. So do the students and their families. And the non-students as well. It's an American thing.

That's my take.

Thanks. Bob.


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