Obama's Student Loan Executive Order Savings: $10 a Month On Average

[bonnie]

Obama's Student Loan Executive Order Savings: $10 a Month On Average

Rick Moran

Obama's executive fiats dealing with the student loan problem turns out to be window dressing - and bad window dressing at that.

The Atlantic:

The first would clearly be the most significant, because it is aimed at helping more student loan borrowers. How much would an interest rate reduction of up to 0.5% affect payments?

For the average borrower, the impact would be small. In 2011, Bachelor's degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.

Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the averagestudent loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn't going to save the economy. While borrowers with bigger balances would save more, this is the average. And even someone with $100,000 in loans would only cut their monthly payments by $28.50.

Payment Limits

As mentioned, the government already has a program for borrowers to reduce their student loan payments to a ceiling of 15% of their income. At this time, just 450,000 borrowers are participating. Clearly, all of those participants would benefit from lowering the max payment to 10%. But how many others would?*

Student loan balances have really only ballooned over the past decade. So this change would affect very few Americans over the age of 32. For the young adults who it may effect, we must remember that educational attainment has some correlation to income. Those with the most debt will have attended business school, medical school, or law school. Most of those people will also have higher incomes, making them ineligible.

The costs of higher education are growing so fast, along with student loans to pay for it, that the bubble is going to burst eventually. This will happen when cheaper, alternative educational opportunities are seen as a substitute to the "college experience" and massive numbers of college age kids simply refuse to play the higher education game anymore.

Bailouts on the horizon?

[Dr. Shane]

Praise God for this blessing that Obama is providing us. God is great and Obama is good. I think my kids will be thanking Obama when they are able to attend the academy. Because of the great work Obama has done with the student loan program, my student loan payment is going from $900/month to $400/month.

Thank you, Obama. God bless you.

Upon completing college I decided to pay back my student loans on a graduated scale. That means every two years my payment increases. I figured I would make more money as my career progressed (and I have). The problem is, according to the schedule, just as both of my kids will be in the academy, my student loan payment would have been $900. That would mean my wife would have to work because I wouldn't be able to pay both the academy for two kids and my student loan payment. Or, my kids simply wouldn't be able to go to the academy. Refinancing was not an option under the terms of my loan.

Now, thanks to the wonderful and loving heart of Obama, I am in the process of financing which means my payments will be $400/month until the loan is paid off. That is more than I am paying now but much less than what I would be paying in the future.

God is great and Obama is good!

[bonnie]

Praise God for this blessing that Obama is providing us. God is great and Obama is good. I think my kids will be thanking Obama when they are able to attend the academy. Because of the great work Obama has done with the student loan program, my student loan payment is going from $900/month to $400/month.

Thank you, Obama. God bless you.

Upon completing college I decided to pay back my student loans on a graduated scale. That means every two years my payment increases. I figured I would make more money as my career progressed (and I have). The problem is, according to the schedule, just as both of my kids will be in the academy, my student loan payment would have been $900. That would mean my wife would have to work because I wouldn't be able to pay both the academy for two kids and my student loan payment. Or, my kids simply wouldn't be able to go to the academy. Refinancing was not an option under the terms of my loan.

Now, thanks to the wonderful and loving heart of Obama, I am in the process of financing which means my payments will be $400/month until the loan is paid off. That is more than I am paying now but much less than what I would be paying in the future.

God is great and Obama is good!

You almost sound like a fawning teenager again.

It will be interesting to see how many ways Obama can prostitute himself for votes in the next 12 months.It should be staggering.

For any government involvement you generally find the taxpayer footing a portion of the bill.

[phkrause]

Not anymore than any other candidate that I've seen and heard all these years.

[bonnie]

Not anymore than any other candidate that I've seen and heard all these years.

Watch the give aways the next few months.

[bonnie]

Student, Car Debt Quietly Added to Bailout Plan

In the dark of night over the weekend when most people were snoozing, the Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other “troubled” assets held by banks.

The changes, which were included in draft language that also opened the bailout program to foreign banks with extensive loan operations in the United States, potentially added tens of billions of dollars to the cost of the program.

Although it was a major addition to what was already the nation’s largest-ever bailout, it did not become part of the debate between Democrats and the Treasury over details of the program. A Monday counterproposal by Senate Banking Committee Chairman Christopher J. Dodd included such consumer loans as well as mortgages, just as the Treasury’s draft did Saturday night.

“The costs of the bailout will be significantly higher than originally considered or acknowledged,” said Joshua Rosner, managing director of Graham Fisher & Co., who charged that the Treasury and Federal Reserve have not been “forthright” about the ultimate cost to the public. The plan gives Treasury the discretion to buy the non-mortgage loans and securities in consultation with the Fed.

Conservatives cited the move as a sign that the massive plan to take over bad mortgage debt already is opening the door to further government bailouts.

“Such a large takeover by the government will surely be accompanied by adverse, unintended consequences,” said Pat Toomey, president of the Club for Growth, a conservative advocacy group. “Already, other companies and industries are lining up at government’s door asking for their own bailout.”

Treasury Secretary Henry M. Paulson Jr. stressed that the additions were needed to ensure that student loans and credit cards - which have become indispensable to the spending habits and career plans of many Americans - do not become victims of the widening credit crunch.

Student loans, which Wall Street firms packaged and sold to investors just like mortgages, already were hit hard in the widening credit crisis earlier this year, with much of the private loan market disappearing. That forced the government to step in and beef up its direct loan programs for college students.

Many financial analysts feared that the credit card market would be the next domino to fall. Credit card debt also is packaged and sold to investors in complicated “derivative” securities that have become difficult or impossible to sell in recent months.

Investors are spurning the complex securities because they are worried about rising defaults in nearly every category of consumer loans, which reduce the value of individual loans and have made it hard to determine the value of pools of loans that back the securities.

Many of the unsellable loans have been sitting on the balance sheets of banks, forcing them to take losses and preventing them from making further loans.

Richard Berner, chief economist at Morgan Stanley, one of the investment banks that stands to benefit from the loan buyback plan, said the program will help ease frozen loan markets and ensure consumers continue to have access to credit.

“The Treasury proposal is crucial to the credit and risk-taking repair process,” he said, predicting that plan will have “dramatic consequences” in helping to “renormalize” loan markets.

But some financial analysts were not sure whether the massive bailout plan will accomplish its goal of calming markets.

“The credit squeeze gripping the financial market won’t disappear soon as a result of this program. Financial institutions will continue to hoard cash, raise credit standards and increase risk premiums” on loans, said Sung Won Sohn, economics professor at California State University.

[bonnie]

Obama’s Student-Loan Takeover

by Roger Hedgecock

07/31/2010

Obama's healthcare "reform" legislation included a federal takeover of the college student-loan business. 

Obama touted this aspect of "reform" as a way to save $68 billion over the next 11 years. The savings would go to pay for expanded Pell Grants for low-income students and to help low-income graduates pay back their student loans.

But more is going on here than the standard Obama redistributionist impulse. Student loans have become a weapon to attack and control private colleges.



Federal government involvement in student loans dates from the Higher Education Act of 1965. Federal interest-rate subsidies made loans to "qualifying" students more affordable. The loan-subsidy program was expanded in 1972 with congressional authorization of "Sallie Mae​," a government-sponsored enterprise that subsidized private-bank originated student loans.

Through Sallie Mae, politicians targeted different groups and various areas for special treatment in the name of "fairness."

The presence of increasing federal subsidies allowed colleges and universities to dramatically raise their tuition, "fees," and other student costs in a cost/debt death spiral that left too many college grads with six- digit debts at the beginning of their post-college careers.



Over the years, attempts to control escalating program costs and student debt through privatization didn't work.

Rather than dismantling the federal-loan program in favor of truly private-sector solutions, in 2004 Salle Mae was spun off as a private corporation (SLM Corp) which still counted the bulk of its "business" administrating the Federal Family Education Loan Program through private banks.

For Obama, the evil in this program was the "profit" the private banks made originating these subsidized and guaranteed loans.

Last month, the federal subsidy program ceased and the direct federal-lending program took over. SLM Corp was left with $145 billion in loan guarantees that included a substantial portion of non-paying borrowers—students who, on graduation, remained unemployed or underemployed during the recession.

Once again, federal intrusion into a private relationship (student and college), undertaken for the noblest motives (expand college opportunities for deserving, but poor, students) left students with crushing debt, colleges with budget dependence on the government, and private investors and taxpayers picking up the mounting losses.

Within days of the federal takeover of the student loan program, this dysfunctional picture got worse.

Obama attacked private for-profit colleges like the University of Phoenix​.

There are 14 of these publicly traded private colleges in the U.S., enrolling about 1.4 million students. These private largely non-union colleges provide instruction connected to jobs and careers, using the best technology available, and flexible hours, to allow students to work and learn at the same time. Enrollment is booming as unemployed and underemployed folks seek new training and skills.

Students attending these private colleges are eligible for federal student loans. In Obama's world, this is an intolerable subsidy of the college’s profits.

In a study released this week, the Senate Committee on Health, Education, Labor, and Pensions criticized these colleges for the profit they make, alleging that tuition is higher, student loans larger, and defaults on those loans twice those of public colleges.


The report also charges that students drop out at higher rates, are not properly supervised, and take classes that are not accredited.

The report states that 30% of students from these for-profit colleges have defaulted on their student loans since 1995, as compared with just 15% of public-college students.

The Obama Department of Education moved last Friday to cut off student loans to private colleges where a too-high proportion of the students fail to repay their loans.

Sen. Tom Harkin (D.-Iowa) called for even more stringent federal control of private colleges to ensure that "tax dollars are not wasted and students are not cheated".

This entire attack is bogus. Here at last—transparency in the Obama regime. A transparent power grab.



Tuition is higher at private colleges because "tuition" at public colleges is heavily subsidized by taxpayers to start with. Therefore, student loans are larger at these private colleges to cover the real cost of the education. The truth is that tuition at these private colleges is much lower than the true cost of public colleges when you add the "tuition" and the taxpayer subsidies.

The default rate for private-college students is also higher because these private colleges are providing the flexible, technical education to minority and poorer students that public colleges refuse to do.

In private colleges, you work on your schedule, at your pace, using the computer with much less (if any) class time. Many of these students "drop out" short of a degree to gain a job when their skill level is high enough. By contrast, public union-run colleges still make students work to the college schedule in centralized campuses with high costs.

As in all such comparisons, in the private sector the consumer is king. In the public sector, the government is king.

Obama has stated a goal of doubling the number of college grads by 2020. With public-college budgets stretched thin, forcing tuition and fees to escalate, no amount of federal-loan infusion will reach this goal.

Attacking the private colleges and muscling them with federal-loan threats and federal Education Department rules makes reaching the goal of more college grads that much harder. And how is attacking the really effective way to get the unemployed retrained going to help get us out of this recession?

With Obama, it seems that the soaring rhetoric full of lofty goals is a smoke screen hiding the real agenda of replacing private business solutions with more federal programs at a higher cost.

[Dr. Shane]

If we are going to criticize Obama for what he has done bad (and he has done a lot) we need to give him a pat on the back when he does good. He did good here. He deserves a pat on the back.

[bonnie]

If we are going to criticize Obama for what he has done bad (and he has done a lot) we need to give him a pat on the back when he does good. He did good here. He deserves a pat on the back.

For those that believe in government handouts there is no doubt that they will be patting Obama on the back.

Obama has not done anything for the purpose of doing good. Any more than a prostitute offers herself for the good of men.

Obama gives nothing of his own,he takes from those that he can and gives to those that demand.

Whenever Obama or government gives it costs taxpayers.The government has nothing of it's own to give.

The free lunch is going to cost others to provide it for those that think they belong to a special class of people

[bonnie]

Obama's Student Loan Bailout

Don't ask why those balances are so high.

by John Hayward

10/27/2011

63

Comments

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:

Speaking to a friendly audience of college students in Denver, Mr. Obama said the changes “won’t cost taxpayers a dime but will save you money and will save you time,” and tied the ever-rising cost of education to the nation’s lagging economy.

“Living with that kind of debt means making some pretty tough choices. … It could mean putting off buying a house. It may mean you wait longest to start a family,” he told the crowd, which erupted with cheers when the president spoke of moving ahead without waiting for Congress to act.

Having that extra $4 to $8 in their pockets should help a lot of low-income students get those families started earlier.

Of course, small benefits paid to a large pool of individuals over the course of many years can add up to sizable total costs. The Associated Press helpfully provides some more details of how the funding system would work: “A White House official says it doesn't cost taxpayers anything because when the loans are consolidated, the government no longer has to pay a subsidy to private lenders on the Federal Family Education Loan Program loans.”

Does that sound like an adequate explanation for how lowering the maximum repayment on a student loan by 5% of annual income per year, and shortening the life of the loan by 5 years, won’t cost anybody anywhere anything? Keep in mind that the President is fiddling with over a trillion dollars in total student loan debt. That’s more than America’s total credit card debt.

Where does Obama get the authority to throw this heavily hyped bone to young voters? Simple: ObamaCare. As you may recall, that wondrous “health care” package also federalized student loans. It was presented as a cost-saving measure.

The big consolidation and refinancing scheme is making lenders nervous, since it would strip them of valuable assets. The interest income from a trillion dollars in outstanding debt is not chump change.

The possibility of future tinkering with loan balances will give nightmares to an already skittish credit market. Obama has toyed with the idea of mortgage “cramdowns” on an epic scale before. The notion of loans as an unfair trap that people need to be “rescued” from is gathering steam, from the “Occupy” protests to the White House. It’s tempting for politicians to promise “debt relief” they can achieve with a wave of the Big Government magic wand, to the cheers of a public conditioned to hate evil bankers. It’s not as if any “real” property is being seized for redistribution, right? It’s just the all-knowing, all-loving President erasing some horrid numbers on a spreadsheet.

The Obama student loan bailout also distracts students, and their parents, from the real question they should be asking: Why the hell is college so expensive? Why are people racking up gigantic loan balances for educations that have become an unreliable middle-class inoculation against menial labor and unemployment?

A big part of the answer is the same subsidy static that makes medical care so expensive: nobody really pays for their own college education. The government has been pumping gigantic amounts of money into the educational system, from absurdly expensive and underperforming grade schools, to insanely expensive colleges that aren’t exactly churning out capable graduates with marketable skills.

Education is one of the worst examples of rising prices coupled with declining quality in America. The cost of tuition has skyrocketed at many times the pace of inflation, income growth, or any other metric. The whole affair has become so unmoored from reality that student loan balances have become virtual targets in a political videogame. The true cost and value of a college education is a mystical secret that almost no one understands, least of all the kids applauding the promise of “debt relief” from government heaven.

[Dr. Shane]

Obama has not done anything for the purpose of doing good. Any more than a prostitute offers herself for the good of men.

I think that is an unfair criticism and serious damages the reputation of the one making it.

[bonnie]

Originally Posted By: bonnie

Obama has not done anything for the purpose of doing good. Any more than a prostitute offers herself for the good of men.

I think that is an unfair criticism and serious damages the reputation of the one making it.

That's fine.Watch the next few weeks/months as more is handed out regardless of the cost to others to ensure himself a few more votes.There is one word that describes that behavior