There is indeed a student loan crisis. And the numbers show it is entirely the doing of President Obama, with an assist from his supporting cast in the Democrat-run Congress.
The crisis has its origins in 2010, when President Obama essentially nationalized the national student lending program by signing a law he had proposed and Congress passed that muscled banks out of the picture as lenders. Banks had been providing government-backed student loans, but Obama, in all of his community organizer wisdom, figured distant government bureaucrats could do it better than bankers and save taxpayers money. It’s laughable, sure, but he and Democrats apparently believed it.
“By cutting out the middleman, we’ll save the American taxpayers $68 billion in the coming years,” Obama said during the signing ceremony. “That’s real money.” By the way, that savings number comes from the Congressional Budget Office, which once again shows that a palm reader would probably be more accurate in projecting impacts.
The president assured Americans that anyone who wanted to go to college would be able to get a loan. Again, totally predictably, federal student loan debt skyrocketed, from $154.9 billion in 2009 to $1.1 trillion by the end of 2017, according to Investor’s Business Daily.
Eight years. One president. Another unforced crisis.
But that’s just for millions of students that jumped at something they could not afford and many would not finish. Taxpayers are really taking it in the hindquarters.
A recent U.S. Department of Education report puts it starkly. The report points out that the program had a $25 billion surplus in 2012. That fell to a $5 billion surplus by 2015, was $8.4 billion in the red in 2016 and plummeted to a $36 billion loss last year. Who knows where it will be by the end of this year.
Remember. This was pitched as a way to not only save money, but make money. Why let the banks make the interest when the government can? But government by nature is somewhere between Keystone cops at best and criminal corruptocrats at worst, with much falling somewhere in the middle. So naturally instead of making money, or doing anything positive at all, it cost American taxpayers $36 billion last year and presumably a lot more this year.
In addition to the Keystone Cops-corruptocrat part of the formula, Obama also played magical government money politics with it. Precisely when he directed Washington bureaucrats to run the loan programs, he solemnly intoned in his special way about the burden student loans are to young people and that “we” — meaning American taxpayers — need to help them shed this burden (which, you recall, he was helping heap on them.)
Obama and his pen instituted a series of programs that made it easier for students to get out of paying back their loans. Whatever compassion there may have been in this nonsensical scheme, there was surely more than a heavy dose of politics. Politicians giving away goodies (that are not theirs) to others is a time-tested way to get votes.
One of his programs — called “income-driven repayment” but nicknamed “Obama student loan forgiveness” — allows borrowers to not make payments when their income falls below a specific threshold, then caps payments as a percentage of total family income. Any debt left over at the end of 25 years is forgiven. Because that’s how real life works.
It doesn’t take a genius with an expensive degree in human nature to know the perverse incentives that program provided. Students with debt rushed into the program, minimized income at certain levels, kept income off the books and began running the clock out on the 25 years. Their debts were so massive, it made sense to them — even if it was immoral.
A survey of student borrowers by LendEDU found half do not plan to pay back all their debts because, as Obama and Democrats kept prattling on about, the feds would just forgive them.
Why were the debts so massive in the first place? Again, human nature. Knowing the government was going to make sure anyone could get a loan for college, universities around the nation began ramping up tuitions at a faster rate than their already rapid increase. After all, the windfall was coming, and there were no controls and no market mechanism anywhere because the government was doing everything.
This is all terrible policy from the start, even before Obama turned it into a financial horror flick.
Seriously, explain again why people who do not send their children to college should be working to subsidize and actually pay for those who do? Explain again how this is Democrats looking out for blue collar, hard-working Americans that they suppose are their constituency?
All this shows yet again just how extraordinarily bad a president Obama was — and how bad Democrat policies continue to be.
Rod Thomson is an author, TV talking head and former journalist, and is Founder of The Revolutionary Act.
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