Morning Bell: Obama’s Student Loan Gift to Occupy Wall StreetPosted By Mike Brownfield The Atlantic On November 2, 2011
In the 2008 election, Senator Barack Obama reached out to young Americans with a fresh message that appealed to their dissatisfaction with the nation’s political process. He called it hope and change, and he connected with their hearts
and minds with such success that he captured 66 percent of the vote of those under 30. Now, three years later, some of those young Americans have taken to the streets not in joy and exuberance but in anger and frustration. President Obama has heard their call, and he’s now appealing once again to his political base.
Last week President Obama came bearing gifts in a speech at the University of Colorado in Denver–relief from student loan debt, delivered by way of an executive order without congressional authorization. Under the President’s plan, money lenders cannot require students to pay more than 10 percent of discretionary annual income for student loans. It also completely forgives student loans in 20 years, five
years fewer than before. But here’s the fine print, a key fact that the President failed to mention in his speech: For all its pomp and circumstance, the President’s plan would save college students less than $10 per month [2]–barely enough to buy two cups of coffee from Starbucks.
But that supposed “relief” will still cost taxpayers, who are already stretched thin. House Education Committee chairman John Kline (R-MN) criticized the President’s plan [3] on Fox News on Monday and says it’s not something America can afford: "This administration has been bypassing Congress on issue after issue after issue — they’ve sort of famously issued hundreds of rule changes and executive orders to bypass Congress, so I think that’s a mistake…We simply can’t keep providing money from the federal government in the form of subsidized or actual loans and Pell Grants when we don’t have the money."
Apart from the cost and the President’s continued penchant for circumventing Congress, Heritage education expert Lindsey Burke says [4] that the expanded student loan forgiveness is bad policy. Burke writes that the plan “shifts the burden of paying for college from the student–the person directly benefiting from college–to the nearly three-quarters of Americans who did not graduate from college.” [It makes further mockery of the claim by those "Occupiers" that they are part of the 99%who pay taxes!] In addition, she adds [4], it does nothing to make college more affordable in the long run–in fact, it serves to make college more expensive.
When it comes down to it, a major reason for tuition inflation over the years is government involvement in the first place. Pell grants have increased 475 percent, while the cost of college has increased 439 percent since 1982–faster than increases in the cost of health care–after adjusting for inflation. Federal subsidies insulate colleges from being remotely worried about spending money wisely or cutting costs.
If the President were truly interested in making college more affordable, Burke recommends that he consider limiting the number of years a student is eligible for federal subsidies, tying aid to merit, and encouraging states to put more course content online. It the short run, though, none of those measures would serve the political end of appealing to a voting block camped out across the country — and indeed mere blocks from the White House. It’s an ironic sight, in Washington, D.C., seeing the Occupy Wall Street encampment in McPherson Square. The President whom their generation helped elect has perpetuated a government contributing to the very societal ills underlying their grief–corporate bailouts, a weak economy, and poor job prospects. Unfortunately, they embrace a philosophy of anti-capitalist, big-government solutions that will that will only make matters worse. And instead of building an America in which future generations will be free to learn, grow, invent, and lead, the President is resorting to policies that curry their short-term political favor but will lead to long-term malaise.
---------------------------------------------
Article printed from The Foundry:Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2011/11/02/morning-bell-obamas-stude
nt-loan-gift-to-occupy-wall-street/
URLs in this post:[1] Image: http://blog.heritage.org/wp-content/uploads/occupy-dc-11-2-20 11.jpg
[2] less than $10 per month: http://hotair.com/archives/2011/10/27/great-news-obamas-stude nt-loan-changes-puts-8-in-borrower-pockets-per-month/
[3] criticized the President’s plan: http://www.politico.com/news/stories/1011/67213.html#ixzz1cYH 6IKA6
[4] says: http://blog.heritage.org/2011/10/27/pushing-basket-weaving-co llege-loan-debt-onto-working-class-taxpayers/
Copyright © 2011 The Heritage Foundation. All rights reserved.
____________________________________________
Obama's Student-Loan Order Saves the Average Grad Less than $10 a Month / October 28, 2011
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 problem with an executive order, yet his effort isn't like to have much impact, says Daniel Indiviglio, an associate editor at The Atlantic.
His order contains three separate components.
1 - He will assist borrowers with direct government loans and government-backed private loans to consolidate their balances, cutting the effective rate on student loans by up to 0.5 percent.
2 - He will further limit the amount of student loan payments from 15 percent of a graduate's income to 10 percent.
3 - Debt forgiveness will kick in at 20 years instead of 25, as it is now.
It bears mention that the second and third components of this order were already set to be implemented by legislation in 2014, and that President Obama's executive order has simply bumped up the time horizon. Regardless, the aggregate effects of these reforms, even following the somewhat optimistic estimates produced by the White House, have little
potential to bring about real change in the student loan sector.
Within the first component, a 0.5 percent decrease on the effective rate on loans will do little to alleviate the financial burden of loans on recent graduates. Over the past 10 years, the average student loan debt varied from $17,464 to $27,204 -- meaning that with a 0.5 percent decrease in rates the average graduate stands to gain between $4.50 and $7.75 per month. This is hardly a financing breakthrough.
The final two components also do little to relieve the problem. These components can neither reverse the spiraling costs of higher education, nor can they drastically reduce the payments that students make on their loans. Therefore, the executive order (which might not even stand if it is challenged in court) will likely do little to change the system of higher education financing.
Source: Daniel Indiviglio, "Obama's Student-Loan Order Saves the Average Grad Less than $10 a Month," The Atlantic, October 26, 2011.
For text: http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-action-wont-have-much-impact/247411
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment