Obama eases student loan burden

President Obama plans to ease student borrowers’ repayments by accelerating a measure limited repayments to 10 percent of discretionary income and offering a small interest rate cut for consolidating loans.

Federal student loans lure students into debt and enable colleges to raise tuition, argues Republican presidential candidate Ron Paul.

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  1. If this doesn’t cost anyone any money, great!
    If it does, how is it fair? I certainly understand their pain. Debt is horrible. But they indebted themselves so heavily as an investment in their future. Many other students chose less prestigious programs, lived with parents and/or worked while seeking degrees, and generally acted more frugally. How many individual bad investments can we expect society to pay for?

  2. This will cost the taxpayers some hundreds of billions of dollars. All by executive fiat, without congress. The argument was, “let government take over college loan programs and we’ll save money by being more efficient.” Now that it’s in the government’s hands, Obama can say, “Hmmm… I could make the terms a lot easier on these people and buy votes at the same time, it’s a win-win!”

    The math: a student with $100K in loans who graduates and actually gets a job will only have to pay 10% of the difference between their income and the poverty level for 20 years. So, if they’re making $50,000, that’s 10% of about $40,000 for 20 years or $80,000. The government takes a 20% loss on the loan. If they DON’T get a good job, well, it’s much worse of course. With about $1T in student loans out there, I figure it’s at least a $200B that won’t be paid back. All because President Obama just said so.

    As is almost invariably the case, the people who say, “let the government take over program X so we can get rid of the inefficiencies of the market” are dead wrong because, once the government has control, the politicians can snake things around to their own advantage and make a mockery of the whole thing.

    This is the future of government-run healthcare, so hang on, we’re in for a bumpy ride!

  3. Actually, I should correct this. I had one thing wrong: the new program only applies to people who are students NOW. None of the OWS protesters who have graduated, for example, will be eligible. So this isn’t nearly as big a relief for student debt holders as it seems.

    It will still cost a lot of money over time, but not nearly as much as I said above.