You know a politician is looking for applause when he
speaks in front of a crowd of college students and says he's there to help them
pay back their student loans.
(*SNORT*)
After all, who doesn't like the prospect of free money?
But as the saying (sort of) goes, beware of politicians bearing gifts. That's
especially true this week as President Barack Obama travels the country warning
students that their student loan interest rates are set to double and that he
has the answer to all their problems.
Guess what? He doesn't. But if there's one thing the
president has managed to accomplish, it's in turning this issue into a
political football. And now the [Republican-controlled] House of
Representatives is joining the game.
* YEP... THE BOEHNER/CANTOR REPUBLICANS...
(*SIGH*)
This all began back in 2007 when Democrats pushed for a
five-year student loan interest rate reduction to 3.4% as a "temporary"
subsidy in order to help make the loans more affordable.
* OR MORE ACCURATELY, TO LURE STUPID KIDS INTO BORROWING
MORE THAN THEY SHOULD WHILE AT THE SAME TIME SPURRING ALREADY OUT OF CONTROL
INFLATION IN THE "HIGHER EDUCATION" SECTOR.
Now that "temporary" subsidy is set to expire,
meaning that rates will return to their original 6.8% levels.
* FOR NEW LOANS...!!! FOR NEW LOANS...!!! NOT FOR
EXISTING LOANS...!!!
In the midst of all this, the [Boehner/Cantor-controlled]
House is expected to vote today on a measure that would keep interest rates
where they are - costing taxpayers $5.9 billion for a one-year extension.
(*SLAMMING MY FISTS DOWN UPON THE DESKTOP*)
And under the proposal, the extension would be paid for
by taking funds from Obamacare's Prevention and Public Health Fund.
* WHAT A FRIGG'N SCAM!
Obamacare, instead, should be repealed outright - not
used as a "slush fund" to pay for other programs.
* YA THINK...?!?!
But besides the measure being a flawed and costly way to
pay for the lower interest rates, there's an even bigger problem. The supposed
benefits of keeping the interest rates at 3.4% are largely illusory, and the
president [and Republicans are] selling students a bag of magic beans.
Economist Douglas Holtz-Eakin explains on National
Review's "The Corner":
The interest rate increase sounds serious. After all,
there are 39 million Americans with student loans owing over a trillion dollars
of debt, and interest rates doubling from 3.4%percent to 6.8% would be a huge
hit at a time when households are already struggling.
Serious... except that the president's plan would apply
only to those 23 million loans being borrowed directly from the federal
government.
Except that... not all of those would benefit; it would
apply only to the 9.5 million loans being borrowed through the so-called
subsidized Stafford loans.
Except... the lower rate would apply only to new
borrowers who apply this year.
Except... that no payments are made until after
graduation, so it would not help anyone for several years.
Except... that it would lower monthly payments by an
average of only $7.
* WHILE COSTING AMERICAN TAXPAYERS BILLIONS!
In other words, for an incredibly high cost, students are
realizing very little benefit. And don't forget, these are loans that they're
voluntarily taking on as part of an investment to benefit themselves.
None of this is to say that the federal government should
spend even more to subsidize student loans in an effort to make college more
affordable. It absolutely should not. Federally subsidized student loans are
handed out to millions of college students regardless of risk - let alone
whether they can handle college-level work. Thanks to taxpayer backing, the
loans are offered at rates far below what private lenders would offer. When the
students can't afford to pay, the American people are stuck with the bill.
On top of all this, government intervention in the higher
education marketplace hasn't even succeeded in bringing down college costs. In
fact, the price of a degree has risen right along with government spending.
Pell grants have increased 475% since 1980, and yet the cost of attending
college has increased 439% since 1982. It's a vicious cycle that will only get
worse with more government subsidies.
There's a better way to drive down college costs.
Heritage's Stuart Butler writes that the higher education industry is on the
verge of a "transformative re-alignment," and notes:
"...most college leaders live in a bubble in which
the costs of ever more elaborate facilities, expanding administrative
bureaucracies, and high-profile professors with light teaching loads can simply
be passed on to customers in the form of higher tuition."
(*NOD*)
But those days are about to end.
* NOT IF WE KEEP SUBSIDIZING THEM...!!!
Underneath the surface, upstart institutions are
perfecting radically new education technologies and business plans at the same
time that young people and their parents are becoming more frustrated with the
traditional higher-education model, and more open-minded about alternatives.
There is every reason to suspect that, quite soon, these new institutions will
do to higher education what Sony did to radios and Apple did to computing.
Afterward, our colleges and universities will never be the same. Few Americans,
one suspects, will look back in regret.
Sure, it might strike all the right populist tones to
tell college students that you're going to give them a hand out, but the
caustic effects of the policy will only make higher education more costly over
time. Instead of a short-term spending splurge that has little benefit,
Washington should pursue a long-term strategy that gives students the help they
really need.
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