Tuesday, November 01, 2011

Obama's Student Loan Bailout

Human Events- President Obama’s exciting “soft dictatorship” re-election strategy, in which he looks for ways he can get around Congress to buy votes with expensive bailout proposals, moved from underwater home mortgages to deep-sea student loans on Wednesday.

“Refinancing” is the hot catch phrase of the day, and Obama’s got some rather dramatic refinancing in mind for those student loans. Besides lowering the interest rates, and allowing students to consolidate private and government loans, he wants to accelerate the implementation of a program to cap student loan repayments at 10 percent of the debtor’s income - after a generous $10,000 deduction for “poverty-level” basic necessities - for a maximum of 20 years.

The current rules limit payments to 15% of income, with remaining debt forgiven after 25 years. Congress voted to implement the new caps in 2014, but Obama wants to use some executive hocus-pocus to jump-start them in 2012. You need only glance at the Occupy Wall Street crowds to see why. Indebted young people are a very carefully targeted Obama constituency. Just wait until they find out how much Obama has left them in debt to the government.

An analysis from Daniel Indiviglio at the Atlantic notes that given the means tests built into the program, making it available only to those with annual incomes below $32,000, the theoretically huge benefits of the Obama plan will translate in practice to something like $4 to $8 per month in immediate savings. Students who rack up really staggering debt loads for advanced degrees will usually end up with too much annual income to participate.

Remarkably, Obama claims this magical minimal debt relief “won’t cost taxpayers a dime,” as the Washington Times reports:  [read more]