By: Michael Clayton
As you may have heard, president Obama took another executive action yesterday in regards to putting a cap on federal student loan repayments. The plan will make it so that certain students with federal loans won’t have to make payments any larger than 10% of their monthly income. With the federal student debt now approaching $1.2 trillion, drastic action needs to be taken to reduce the cost of a college education, but this executive memorandum will only push the burden to the American taxpayer.
This is just Obama’s latest action to expand his “Pay as You Earn” program, which he claims will now help up to 5 million borrowers pay back their student loans, partially. After 20 years of on-time payments at 10% of your monthly income your federal student debt will be forgiven, no matter that amount you still owe. For public service workers the repayment period is only 10 years. Rest assured that this debt doesn’t just vanish into thin air. It will land squarely on the shoulders of the American taxpayer, ultimately adding to the overwhelming burden of our $17 trillion-plus national debt.
This action will not encourage responsible behavior. College students now have an incentive to borrow more money than they need, because they understand that it will not have to be paid back in full. Graduates will now be encouraged to take a job that earns less money as it will make their repayment much smaller. However, most of these young men and women do not realize that they are only “kicking the can down the road”, as they are adding on to our already insane national debt problem.
The president is also supporting a bill by Senate Democrat Elizabeth Warren that would allow borrowers to refinance their student loans, to the detriment of the taxpayer. One think tank claims that this would cost the taxpayer anywhere from $1,200-$3,200 per student borrower, based on the amount that each individual owes. The Congressional Budget Office estimates that this bill “would cost the federal government $51 billion over the next ten years.”
The problem is the absurd cost of a college education, and policies such as these that ensure easy credit for college students are the reason that institutions of higher learning everywhere are raising tuition. This executive action exacerbates the student debt problem by encouraging students to borrow more. Once again government is the problem, not the solution.
I will be the first to say that every young person in America deserves to get an affordable college education, a goal that this action claims to support. However, as long as the federal government is in the business of subsidizing this education, it will never be affordable. There is no incentive for colleges and universities to be responsible with their money when they know the federal government is providing easy credit. Until this correlation is understood the problem will not be fixed, and the federal student loan debt will continue to sky rocket.