Borrow more, repay less

Student-loan initiative will encourage increased debt, tuition hikes

Too many young Americans are borrowing too much money to pay for college that is too expensive, in the hopes of getting jobs that are too hard to come by.


And the president’s new “Pay As You Earn” student-loan initiative changes none of that.

What this unilateral action does, however, is incentivize government expansion, put taxpayers on the hook for more subsidized student debt and ensure already-overpriced colleges continue their decades-long spiral toward unaffordability.

Just another pen stroke in President Obama’s “year of action.”

Obama’s sales pitch for this executive fiat is that by December 2015 an additional 5 million borrowers will be able to cap monthly student loan repayments at 10 percent of income and be forgiven for any unpaid debt after 20 years.

The program does this by expanding a 2010 law that capped repayments for newer loans but excluded borrowers who took out loans before October 2007, or who stopped borrowing by October 2011.

To finance it all, the president – never one to pass up a chance to engage in some class-warfare carpet-bombing – said he will close “tax loopholes” for “millionaires.”

We’re not sure exactly what that means. And we’re pretty sure he doesn’t, either, considering no one in his administration knows how much is even required to fund this program.

“We actually don’t know the cost yet,” Education Secretary Arne Duncan said at a White House press briefing. “We’ll figure that out on the back end.”

How reassuring.

Obama’s unilateral action snubs alternative plans in Congress that seek to address rising tuition costs – the heart of the $1.2 trillion student-loan crisis.

College costs have grown 250 percent in the past 30 years – 25 percent alone since the president nationalized the student-loan industry through a tacked-on provision of the Obamacare bill.

Never mind the inherent inequity of student-loan nationalization – which shifts the burden from statistically well-paid college graduates to the three-quarters of taxpayers who don’t hold bachelor’s degrees. The system simply is unsustainable at its current rate.

Student debt, which already exceeds credit-card and auto-loan debt, is the fastest-growing consumer debt category, swelling by nearly 8 percent a year. And the three-year default rate is at a record 14 percent.

Does this country have enough “millionaires” to pay for that?

The Obama plan – which lasts only as long as he is in office – proposes no long-term solution to the student-debt dilemma. In fact, it worsens the situation by greenlighting colleges and universities to raise tuition higher.

“It induces people to borrow more than they need to, which can have a negative impact on college prices,” said Beth Akers, a fellow in the Brookings Institution’s Brown Center on Education Policy.

One of the more peculiar provisions of the Pay As You Earn plan allows graduates who take government jobs to be eligible for loan forgiveness in 10 years instead of 20.

Try to wrap your head around that for a moment: Someone gets a taxpayer-subsidized loan to pay their way through what is most likely a taxpayer-subsidized university so they can obtain a taxpayer-funded job to avoid repaying their taxpayer-subsidized debt and eventually retire on a cushy pension – funded by, who else, taxpayers.

Who picks up the tab for this cradle-to-grave job corps scheme? It should be called the “You Pay As I Earn” plan.

Actually, Obama’s government-employment provision may be the most practical in the entire Pay As You Earn initiative – by the time some college students graduate and enter the labor market, government jobs may be all that’s left.



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