President Obama has spoken a great deal about college loan debt—and all the while he has done this, the problem has gotten worse.
Investors Business Daily has an excellent article today on how the president’s policies and rhetoric have contributed to the problem. This jumped out at me:
Through words and actions, Obama has encouraged irresponsibility on the part of student borrowers. He constantly talks as if student debt were an unfair burden they unknowingly had foisted upon them.
It could be argued that a college education is still considered such an important factor in future earnings that many students feel they have no choice but to take out hefty loans to obtain a degree. But they should be mindful of what they are doing and also that there are other, lower priced options.
Before taking out a loan, every prospective college student should read Arthur Brooks’ famous article “My Valuable, Cheap College Degree.” Brooks managed to become head of the American Enterprise Institute, one of America’s premier think tanks without going into debt.
Instead of proposing searching for other avenues to a degree or employment, President Obama seems to have a short cut: find a way not to pay all your college loan debts.
At the same time, he's made it easier and easier to avoid paying back student loans in full. Earlier this year, for example, Obama expanded eligibility for his "pay as you earn" program, which limits loan payments to 10% of income, with any debt left after 20 years forgiven.
And indebted former students seem to be listening:
Students got the message. The St. Louis Fed reports that 27.3% of student loans in repayment are at least a month behind in payments. That's a far higher delinquency rate than any other kind of debt, and it's significantly higher than the delinquency rate 10 years ago.
"This overall level of delinquency is very concerning," concluded authors Juan Sanchez and Lijin Zhu.
A 2013 Consumer Financial Protection Board report found that less than half of this federal loan money was actually being paid. About 30% was held by borrowers still in school or in a grace period, another chunk in deferment or forbearance, and almost 14% was in default.
No wonder Obama keeps trying to distract the public by focusing everyone's attention on student sob stories.
IBD quotes a new study showing that 27.3 percent of student loans are delinquent.
One thing these delinquents apparently didn’t learn from their expensive educations: morality.
President Obama re-structured the way college loans are made in 2010. Before that, private lenders made low-interest rate loans guaranteed by the government. In the name of lowering the costs, President Obama cut out the middle man and the government took over the loans program.
Under the Obama plan, the federal government is now the only place to go for a college loan. This did not make the program more inexpensive. On the contrary, the Congressional Budget Office just upped its ten-year forecast by $27 billion.
Ultimately, somebody will pick up the slack; it will be the taxpayer.
The problem isn’t how loans are granted and repaid (or not repaid), however.
It is that college costs too much. That, not how loans are structured, is the problem what Americans must address.
A good first step: reduce the amount of government money available, through loans and other programs, so that colleges will be forced to tighten their belts and charge less.
As long as government keeps pouring in money, tuitions are going to rise.
It's also a good idea not to encourage young people to be irresponsible.