President Obama Announces Plan to Boost College Tuition Cost

Business Insider ^ | Oct. 27, 2011 | Peter Schiff

[Veritas_et_libertas]

President Obama yesterday announced a plan that will ensure students are able to commit to higher levels of federally backed student loans.

By limiting student obligations to repay, and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuitions at a rate that outpaces nearly every other cost center in the American economy.

The move will come as a great relief to an education establishment increasingly concerned that students might no longer be able to afford skyrocketing tuition rates.

[Veritas_et_libertas]

Everyone should read this article to understand the horrible impact that Obama's student loan plan is going to have on the future of our country. This article does an excellent job of explaining the impending disaster.

[NoLibZone]

Also note that end result will be fewer loans and at a higher cost.

"Let me say just one thing.

Student loans are a liability to the borrowing student but an asset to those who hold the loan, the lender.

Many of these loans have been syndicated into Sally Mae bonds and sold to investors.

By Obama changing the terms of the loan, the loan holders/bond holders have been screwed.

This a default and the value of those loans/bonds will plummet. Just like when people started defaulting on sub-prime loans. The world markets tanked as investors stopped buying mortgage backed loans.

This will happen to student backed loans and liquidity will dry up. Fewer student loans, now that the POTUS can unilaterally change the terms post-issue.

Obama will destroy student lending. Dumb-*ss or evil-*ss? We report. You decide."

7 posted on Wednesday, October 26, 2011 6:24:28 PM by April Lexington

[bboop]

Oh I see, We the Taxpayers get to pay for someone else’s Lazy Loafers to get their college degrees and get reprogrammed into Commies.

How about the universities just remembering that they are a business and if they were competitive, people would come. So we really are subsidizing the universities, which also have NO CLUE about capitalism or money.

So disgusting.

[E. Pluribus Unum]

The dirty little secret is that most “financial aid” comes from overcharging non-minorities and using the excess to fund “financial aid” to Eric Holder’s people.

An intended consequence of this is that non-Eric Holder’s people bury themselves in student loans that are now owned by the federal government.

Get this: student loans are the ONLY debt you cannot escape through personal bankruptcy.

This means that the vast majority of non-Eric Holder kids graduating from college these days are indentured slaves to the federal government.

If you don’t think Washington has plans to exploit this situation, you must be from some other planet.

[Soothesayer9]

Student loans. The next bailout. The next CRASH.

Was only a matter of time. In addition to the federal govt, part of the problem is colleges themselves, charging 100k for a damn English degree (among other cheap majors). They will regret the day they decided to foist their greed onto the taxpayers. There is no reason for them to have multi-million dollar gyms and sports arenas, nor 1 mill+ bio research facilities on small campuses.

[RC2]

The whole idea of this administration is to ruin the country, one step at a time. Put them all together and you will see the real story. He should be impeached.

[Old Retired Army Guy]

Aside from the bath taxpayers will be taking on this, the average benefit to the paying back his/her loan will be a payment reduction of $4 to $8 dollars per month.

[Sooth2222]

The easiest way to make anything impossibly expensive is to ask the gov't to make it "affordable".

[No Socialist]

This is absurd. It’s just like credit cards. Rack up huge debts because you just go bankrupt and don’t worry about paying them anyway. What about kids like my niece, who is on a full student loan ride for graduate school? She’s going to school, not working, and living in a deluxe condo for $1500 per month. I guess most of that expense will be written off, even though she could work, go to school part time, and live in a modest apartment.

[Old Retired Army Guy]

Aside from the bath taxpayers will be taking on this, the average benefit to the person paying back his/her loan will be a payment reduction of $4 to $8 dollars per month.

[WhyisaTexasgirlinPA]

Income Based Repayment came from the Dem controlled Senate/Congress - it mean those who are “under employed” can base their repayment, no matter the amount owed, on a portion of income and after 20/25 years the loan is paid in full....so $50 a month for a “community organizer with a law degree and $200K in loan debt” can actually repay $12K and be debt free

[wildbill]

Limit loans to four years. The normal college program (when standards were higher by the way) was a four year path to a BA.

However, the educational establishment actively promotes the 5 and even 6 year programs to students to ease their path—and thus extend the tuition because the students have to pay a minimum to be a full time student, regardless of the hours.

[Painesright]

The student loan program that King Obama announced this week is typical vote-buying welfare that invites abuse and fraud.

True story. I struck up a conversation with a woman in an airport while waiting for a flight. The economy and the plight of recent college graduates came up. She openly (without a hint of shame) told to me how her daughter plans to take advantage of Sugar-Daddy Obama’s generosity.

Her daughter is majoring in a graphic design program at an expensive CA university and already has $56,000 in student loans.

Realizing that the labor market is depressed, instead of graduating, she is staying in school and living off student loans as long as she can. Which is what millions of others will do too.

She has no incentive whatsoever to limit how much debt she racks-up. She knows that she will not be held accountable to pay it back. Why stop at $56,000? $100,000! $150,000! $200,000! Sky’s the limit when you are spending free money!

After 20 years of repaying not much if any of her student loans, her debt will be forgiven.

How neat! Like free money or something!!

She added insult to injury by telling me that in her daughter’s line of work, many times she will be paid cash or on a 1099/self-employed basis.

So, since her daughter doesn’t plan to show much income on her tax returns anyway, the 10% of discretionary income will be practically 0. She plans to pay back almost ZERO!!

I shudder to think that we already have $1 trillion in student loan debt. With a government give-away like this one, we could easily double that to $2 trillion. What happens when the gov’t has to start forgiving 100s of billions in dollars in student loan debt?

Who pays for it? The money was spent. Somebody expected to get paid back. Who loses and/or who pays it if not the student?

That is exactly how the system will be gamed.

Those brainwashed kids standing behind Obama and cheering in front of him have idea how quickly he is destroying their country. So sad.

Easy, cheap, government-guaranteed money caused the housing bubble. Now it has caused a higher education bubble.

This is the vote-buying politicians’ way to keep the bubble inflated and keep the money flowing to one of their best mouth-pieces... liberal professors.

And the politicians won’t stop bribing the people with their own money until we are Greece on steroids.

I am profoundly sad to say that this woman was NOT an Obama-supporting liberal.

That is what happens when a country goes Socialist.

EVERYONE takes as much as they can, until there is nothing left to take.

As Prof. Alexander Frazer Tytler supposedely said back in the 1800’s (paraphrasing): A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largesse out of the public treasury. From that moment on the majority always vote for the candidate promising the most benefits from the treasury with the result that democracy always collpases over a loose fiscal policy, always to be followed by a dictatorship.

That describes Greece today. It could very well be America soon.

[E. Pluribus Unum]

“From each according to his abilities, to each according to his needs.” -Karl Marx

[andy58-in-nh]

More absolute anti-economic insanity from the most destructive Administration in American history.

And meanwhile, the stock market ratchets higher and higher on never-ending doses of Hopium....

If none of what is going on today makes sense to you, it might well mean that you're sane.

[Veritas_et_libertas]

Thanks for that. Your post perfectly illustrates the problem.

[businessprofessor]

Get this: student loans are the ONLY debt you cannot escape through personal bankruptcy.

You cannot escape tax debt through bankruptcy either. Your comment is misleading about student loans. First subsidized student loans are heavily subsidized through lower interest rates and interest payment deferrals. The basic deal is that a student is given these generous subsidies in exchange for the inability to discharge the debts in bankruptcy. Students can choose the unsubsidized loans if they want the ability to discharge loans in bankruptcy.

The more important point noted in the article is that students do not need to discharge debts in bankruptcy. The debt is forgiven after 20 years if minimum payments are made (10 years for government and non profit employees). Note that the minimum payment does not even need to cover interest on the debt. The minimum payment is based on reported income.

Your post paints students as victims. Although some profit schools have been accused of deceiving students about job prospects and school credentials, most students are not in these situations. The revised guidelines provide even more incentives for students and universities to collude to receive maximum level of subsidized loans. Students have little downside risk from over borrowing as the subsidy increases the worst a student's later situation becomes.

The subsidies are preventing meaningful reform of higher education. My university increased tuition by 9 percent this year on top of many increases since 2000. Faculty and staff received 3 percent raises. Staff on a defined benefit pension will soon receive 20+ percent retirement contributions by the taxpayer. We charge more for online courses than traditional courses. Given these levels of subsidies, it is difficult to find meaningful competition. Much of higher education can use a commoditized product, standardized evaluation, and unbundling of services to sharply reduce tuition. Lower priced personnel can be hired for tutoring and grading. Research can be eliminated to focus all resources on instruction. The potential is available but federalization of higher education prevents reform.

[Glenn]

When I attended university in 1971, I paid $190/quarter for a full class load. I think it was 16 hours.

I remember because scraping that $190 together every quarter wasn't all that easy on a part-time gas attendant's job.

[E. Pluribus Unum]

My point is that, without the loans, college tuition would not have gone up 900% since 1978.

Can you think of any other reason why it would have done that?

Outlaw student loans.

If you loan money to a student, consider it a gift to them and move on.