Bailing out student loans

President Obama plans another kind of bailout:

In keeping with his new campaign theme of “we can’t wait,” President Obama today will roll out a plan to put more money in the pockets of some of the nation’s 36 million student loan recipients.

Obama has broad latitude in this area – certainly broader than the first two parts of his western campaign trip, underwater mortgages and subsidies for hiring veterans – because one of his early legislative initiatives was to have the federal government take over the student lending business in America.

Obama argued for the measure in 2009 as a cost-savings initiative, saying that the old system of privately issued, government secured loans reduced the amount of available money for needy students and also prevented the feds from making the system more efficient.

But Obama is now seeking to use that new power to obtain a taxpayer-financed stimulus that Congress won’t approve. The idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years.

Take this example: If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.

The president will also allow student debtors to refinance and consolidate loans on more favorable terms, further decreasing the payoff for taxpayers.

via Obama Taps Taxpayers For Student Stimulus | Fox News.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Martin J.

    We should take a cue from things in Greece where the banks are owning up to the debt they caused. We really need to stop bailing the banks out. Let the students learn from default, but don’t protect the banks from the consequences of their greed and their own risk taking.

  • Martin J.

    We should take a cue from things in Greece where the banks are owning up to the debt they caused. We really need to stop bailing the banks out. Let the students learn from default, but don’t protect the banks from the consequences of their greed and their own risk taking.

  • WebMonk

    Multiple items on this one.

    1) As a stimulus plan it stinks. This article isn’t touching on that aspect beyond a quick mention, but this measure’s proponents are using “stimulus” as an advertising point for the idea. I’ll let this sum up the reasons why it’s a bad idea for a stimulus. http://www.freakonomics.com/2011/09/19/forgive-student-loans-worst-idea-ever/

    I agree that the student loan system needs to be overhauled. I don’t think this is a particularly good way to do it. If they want to decrease government costs, there are other ways. If they want to lower student cost, this won’t have much effect 99% of the time – the source of the problem isn’t being touched. (And, frankly, the cost of student loans to the government is pretty small potatoes on the scale of the other issues out there, so I’m not particularly worried about it.)

    Thirdly, the article itself is atrociously misleading! I’ll just point out one of issues – their example of Suzy only paying back $28K of the $212K loan. They used a completely nonsensical example. No one pays the full amount of college tuition without a single grant, scholarship, or their own money. The average student debt for a doctorate is only $58K and only a tiny percent of doctors accumulate over $100K in debt! Using the $212K number is horribly deceptive, purposefully so IMO. And no job is going to remain at $25K/year for 20 years!!

    Let’s run that example with a 7% yearly salary increase to reflect yearly raises and promotions (that’s in a low-raise area of public work. higher raise areas are nearly 10%) and a 2.6% rate of increase for the poverty level (average for the last 10 years) and the $58K in debt at a 2% interest rate. Suzy pays off the entire thing in twenty years.

    And that’s with a person with a DOCTORATE taking an entry-level job at $25,000 yearly salary. If you put in even vaguely more realistic terms, the loan gets paid back even faster.

    The article’s author is being deceptive and wildly distorting things, on purpose would be my guess, though I don’t know that for sure. Maybe the author is just a moron.

  • WebMonk

    Multiple items on this one.

    1) As a stimulus plan it stinks. This article isn’t touching on that aspect beyond a quick mention, but this measure’s proponents are using “stimulus” as an advertising point for the idea. I’ll let this sum up the reasons why it’s a bad idea for a stimulus. http://www.freakonomics.com/2011/09/19/forgive-student-loans-worst-idea-ever/

    I agree that the student loan system needs to be overhauled. I don’t think this is a particularly good way to do it. If they want to decrease government costs, there are other ways. If they want to lower student cost, this won’t have much effect 99% of the time – the source of the problem isn’t being touched. (And, frankly, the cost of student loans to the government is pretty small potatoes on the scale of the other issues out there, so I’m not particularly worried about it.)

    Thirdly, the article itself is atrociously misleading! I’ll just point out one of issues – their example of Suzy only paying back $28K of the $212K loan. They used a completely nonsensical example. No one pays the full amount of college tuition without a single grant, scholarship, or their own money. The average student debt for a doctorate is only $58K and only a tiny percent of doctors accumulate over $100K in debt! Using the $212K number is horribly deceptive, purposefully so IMO. And no job is going to remain at $25K/year for 20 years!!

    Let’s run that example with a 7% yearly salary increase to reflect yearly raises and promotions (that’s in a low-raise area of public work. higher raise areas are nearly 10%) and a 2.6% rate of increase for the poverty level (average for the last 10 years) and the $58K in debt at a 2% interest rate. Suzy pays off the entire thing in twenty years.

    And that’s with a person with a DOCTORATE taking an entry-level job at $25,000 yearly salary. If you put in even vaguely more realistic terms, the loan gets paid back even faster.

    The article’s author is being deceptive and wildly distorting things, on purpose would be my guess, though I don’t know that for sure. Maybe the author is just a moron.

  • Lou

    I don’t mind providing opportunities to refinance or consolidate to help the students meet their obligations, but I agree with Martin that if the students and their parents can’t meet these financial obligations, they should have to deal with the consequences.
    And I especially agree with Martin that the Banks need to be held accountable for the debt and not be bailed out by Washington again, even if the stock market goes south.

  • Lou

    I don’t mind providing opportunities to refinance or consolidate to help the students meet their obligations, but I agree with Martin that if the students and their parents can’t meet these financial obligations, they should have to deal with the consequences.
    And I especially agree with Martin that the Banks need to be held accountable for the debt and not be bailed out by Washington again, even if the stock market goes south.

  • rlewer

    Guess who is going to pay the difference? These are government loans, not bank loans.

    This is expensive vote buying by the present government.

  • rlewer

    Guess who is going to pay the difference? These are government loans, not bank loans.

    This is expensive vote buying by the present government.

  • Rev. Jon Bakker

    To look at it a different way, they are not bailing out students, but the universities and colleges who will benefit from the ability to continue raising tuition at a rate well past inflation that this ‘stimulus’ will provide. The easiest means of ensuring a student’s ability to repay their loans is to drive down the cost of education. I don’t know how best to do this, and those who work in higher education have the least possible incentive to pursue it (since it will directly effect their own income), but that is the means by which you make debt manageable.

  • Rev. Jon Bakker

    To look at it a different way, they are not bailing out students, but the universities and colleges who will benefit from the ability to continue raising tuition at a rate well past inflation that this ‘stimulus’ will provide. The easiest means of ensuring a student’s ability to repay their loans is to drive down the cost of education. I don’t know how best to do this, and those who work in higher education have the least possible incentive to pursue it (since it will directly effect their own income), but that is the means by which you make debt manageable.

  • Lou

    Okay, so if there are no banks involved, then the taxpayers on the hook no matter how we cut it. We fund the federal government who backing most of the loans or we help the students fulfill their obligations. No one is holding the schools accountable, but then again if they are state universities or colleges, then the taxpayer is paying whatever tuitions, grants and loans can’t handle…

    WebMonk#2 – good thoughts! Thanks for that.

  • Lou

    Okay, so if there are no banks involved, then the taxpayers on the hook no matter how we cut it. We fund the federal government who backing most of the loans or we help the students fulfill their obligations. No one is holding the schools accountable, but then again if they are state universities or colleges, then the taxpayer is paying whatever tuitions, grants and loans can’t handle…

    WebMonk#2 – good thoughts! Thanks for that.

  • MarkB

    I think all of the comments so far have missed at least one point. That many of the students who take out these loans never ever get their degrees. There is a whole lot of pressure on students today to go on to college, even though there are some pretty good ways to make a living without a college degree. I am thinking here of skilled trades, a true vocation.

    So now how does one pay back the student loans if they don’t have that degree and didn’t say learn a trade. Now they might be working at a dead end job, or unemployed or maybe fullfiling the vocation of being a full time mother.
    So how does this calculate out after 20 years of making the minimum payments and then the government takes over?

  • MarkB

    I think all of the comments so far have missed at least one point. That many of the students who take out these loans never ever get their degrees. There is a whole lot of pressure on students today to go on to college, even though there are some pretty good ways to make a living without a college degree. I am thinking here of skilled trades, a true vocation.

    So now how does one pay back the student loans if they don’t have that degree and didn’t say learn a trade. Now they might be working at a dead end job, or unemployed or maybe fullfiling the vocation of being a full time mother.
    So how does this calculate out after 20 years of making the minimum payments and then the government takes over?

  • Kimberly

    I realize that as a recent graduate with a great job and simple lifestyle I am very blessed to be paying off my graduate loans long before 10 years (one down, 8 months to go on another) and have the ability to help with undergrad loans my parents took out.

    But honestly, students need to consider the whole cost of education and think about delaying Masters/Doctorates until they get a handle on undergrad debt OR choosing to live a very simple life, on a budget and working towards other big goals. Live in an apartment for a while; you don’t need your own house the moment you graduate or get married. Buy a good used car rather than a brand new one. Limit your social spending and vacation locations. I hope students (and others) learn to be responsible about borrowing other people’s money. If you don’t think you can pay it back responsibly, don’t take it!

  • Kimberly

    I realize that as a recent graduate with a great job and simple lifestyle I am very blessed to be paying off my graduate loans long before 10 years (one down, 8 months to go on another) and have the ability to help with undergrad loans my parents took out.

    But honestly, students need to consider the whole cost of education and think about delaying Masters/Doctorates until they get a handle on undergrad debt OR choosing to live a very simple life, on a budget and working towards other big goals. Live in an apartment for a while; you don’t need your own house the moment you graduate or get married. Buy a good used car rather than a brand new one. Limit your social spending and vacation locations. I hope students (and others) learn to be responsible about borrowing other people’s money. If you don’t think you can pay it back responsibly, don’t take it!

  • http://www.redeemedrambling.blogspot.com/ John

    Helping the banks. Again. Surprise!

  • http://www.redeemedrambling.blogspot.com/ John

    Helping the banks. Again. Surprise!

  • http://enterthevein.wordpress.com J. Dean

    You know, Mr. President, I realize that economics isn’t your thing, but eventually somebody has to foot the bill…

  • http://enterthevein.wordpress.com J. Dean

    You know, Mr. President, I realize that economics isn’t your thing, but eventually somebody has to foot the bill…

  • DonS

    This article by The Atlantic states the matter a bit more clearly and accurately than the original posted article: http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-order-saves-the-average-grad-less-than-10-a-month/247411/

    Webmonk’s comments @ 2 are on the money (no pun intended ;-) )

    The average graduate in 2011 had about $27k in student loan debt, not $228k! However, the trend is sharply up in the past decade, during which average debt has ballooned from $17k to $28k.

    This measure, which probably exceeds the authority the president has without supporting legislation, is an obvious pander to the youth vote, that will have little short or medium term effect on students or the economy. Moreover, it obviously doesn’t address the real problem, which is long-term higher education inflation that greatly exceeds the general CPI and wage inflation rates. Essentially, since any additional subsidy by the government will comprise borrowed money, Obama is proposing to somewhat relieve student loan holders by transferring their indebtedness to….the entire youth population, in the form of government debt that they will all have to deal with. Essentially, this is a transfer of responsibility from the haves (those obtaining college degrees with student loans) to the have nots (all taxpayers, including those not getting any benefit from the loans). Typical government stupidity.

    The real solution, obviously, is to reduce the demand for higher education, and thus the pressure on prices. Way too many Americans go to college. Reduce that number to those who academically belong there, and you will see a sharp decrease in college costs over time. It is not an accident that the two sectors of the economy facing the worse inflation pressures (health care and higher education) are the two sectors in which the government meddles and subsidizes the most.

  • DonS

    This article by The Atlantic states the matter a bit more clearly and accurately than the original posted article: http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-order-saves-the-average-grad-less-than-10-a-month/247411/

    Webmonk’s comments @ 2 are on the money (no pun intended ;-) )

    The average graduate in 2011 had about $27k in student loan debt, not $228k! However, the trend is sharply up in the past decade, during which average debt has ballooned from $17k to $28k.

    This measure, which probably exceeds the authority the president has without supporting legislation, is an obvious pander to the youth vote, that will have little short or medium term effect on students or the economy. Moreover, it obviously doesn’t address the real problem, which is long-term higher education inflation that greatly exceeds the general CPI and wage inflation rates. Essentially, since any additional subsidy by the government will comprise borrowed money, Obama is proposing to somewhat relieve student loan holders by transferring their indebtedness to….the entire youth population, in the form of government debt that they will all have to deal with. Essentially, this is a transfer of responsibility from the haves (those obtaining college degrees with student loans) to the have nots (all taxpayers, including those not getting any benefit from the loans). Typical government stupidity.

    The real solution, obviously, is to reduce the demand for higher education, and thus the pressure on prices. Way too many Americans go to college. Reduce that number to those who academically belong there, and you will see a sharp decrease in college costs over time. It is not an accident that the two sectors of the economy facing the worse inflation pressures (health care and higher education) are the two sectors in which the government meddles and subsidizes the most.

  • larry

    If Ms. Creamcheese marries John Doe will she keep her last name or hyphenate.

    Sorry for some reason that hypothetical last name cracks me up.

  • larry

    If Ms. Creamcheese marries John Doe will she keep her last name or hyphenate.

    Sorry for some reason that hypothetical last name cracks me up.

  • steve

    “…and also prevented the feds from making the system more efficient.”

    Cough, cough, choke, cough. The Fed? Making the system more efficient? Did I read that right? Here’s how the Fed makes things “more efficient”: they grab power, centralize it, bureaucratize it, bloat it, making it cost way more than it should, and the end of it all being to help people in bad situations learn to depend more on the government.

  • steve

    “…and also prevented the feds from making the system more efficient.”

    Cough, cough, choke, cough. The Fed? Making the system more efficient? Did I read that right? Here’s how the Fed makes things “more efficient”: they grab power, centralize it, bureaucratize it, bloat it, making it cost way more than it should, and the end of it all being to help people in bad situations learn to depend more on the government.

  • JunkerGeorg

    “The price charged for anything is what the market will bear.” That’s a reality, that is, at least in a truly free marketplace. But we don’t have a free marketplace exactly. We have governmental intrusion into yet another part of our life, namely, both education along with it’s funding–just another example of how the 10th Amendment is ignored as we all are made to be more and more dependent upon Government, who comes to our rescue, bailing us out of a mess which, ironically, they themselves have caused and contintue to perpetuate. The reason why education is so costly, the reason why a student can no longer work his way through college, paying his tuition while incurring little or no debt, is because of government student loans. How? Government student loans have introduced vast amounts of taxpayer money into the education industry that is guaranteed by the government (the taxpayers). As a result, tuition costs have skyrocketed because universities, colleges, and online schools can charge more, because, again, that is what the market will bear. When will we learn that anything government gets involved in outside its constitutionally-enumerated authority/boundaries, the individual will suffer as prices rise. Get government out of the student loan business, privatize it, freeing up the marketplace, and tuition costs will drop.

  • JunkerGeorg

    “The price charged for anything is what the market will bear.” That’s a reality, that is, at least in a truly free marketplace. But we don’t have a free marketplace exactly. We have governmental intrusion into yet another part of our life, namely, both education along with it’s funding–just another example of how the 10th Amendment is ignored as we all are made to be more and more dependent upon Government, who comes to our rescue, bailing us out of a mess which, ironically, they themselves have caused and contintue to perpetuate. The reason why education is so costly, the reason why a student can no longer work his way through college, paying his tuition while incurring little or no debt, is because of government student loans. How? Government student loans have introduced vast amounts of taxpayer money into the education industry that is guaranteed by the government (the taxpayers). As a result, tuition costs have skyrocketed because universities, colleges, and online schools can charge more, because, again, that is what the market will bear. When will we learn that anything government gets involved in outside its constitutionally-enumerated authority/boundaries, the individual will suffer as prices rise. Get government out of the student loan business, privatize it, freeing up the marketplace, and tuition costs will drop.

  • steve

    Larry, #12, or she could marry the grandson of that great Buffalo Soldier, George Wanton.

  • steve

    Larry, #12, or she could marry the grandson of that great Buffalo Soldier, George Wanton.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @7 Right, many many students never graduate and don’t get a credential, but do pay a lot in tuition and opportunity cost. Think of all the law students with high law school loan debt who never pass the bar. There are a lot of those people. They should never have been admitted in the first place. Shame on higher ed profiting by playing on the dreams of these unqualified students.

    Also, a short article on the insults and injuries people people feel from banks.

    http://www.thefastertimes.com/wallstreet/2011/10/09/dear-bank-of-america-this-is-why-america-hates-you/

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @7 Right, many many students never graduate and don’t get a credential, but do pay a lot in tuition and opportunity cost. Think of all the law students with high law school loan debt who never pass the bar. There are a lot of those people. They should never have been admitted in the first place. Shame on higher ed profiting by playing on the dreams of these unqualified students.

    Also, a short article on the insults and injuries people people feel from banks.

    http://www.thefastertimes.com/wallstreet/2011/10/09/dear-bank-of-america-this-is-why-america-hates-you/

  • steve

    sg, why not shame on the government for pushing higher-ed to place unqualified people for reasons that have nothing to do with academics?

  • steve

    sg, why not shame on the government for pushing higher-ed to place unqualified people for reasons that have nothing to do with academics?

  • Tom Hering

    Could universities competing for students by building more facilities, and more expensive facilities, as well as (semi) luxurious housing options, have anything to do with the increase in the cost of higher education these days? Not to mention the cutbacks in state funding. That’s what I see happening locally.

  • Tom Hering

    Could universities competing for students by building more facilities, and more expensive facilities, as well as (semi) luxurious housing options, have anything to do with the increase in the cost of higher education these days? Not to mention the cutbacks in state funding. That’s what I see happening locally.

  • steve

    It’s money, Tom, money. Many of the universities building those large and luxurious facilities have long ceased interest for things like educating. They treat it like garnish. Certainly, undergrads paying big bucks to go to a highly-ranked research university are mostly wasting their money (providing, of course, they are there for said education).

  • steve

    It’s money, Tom, money. Many of the universities building those large and luxurious facilities have long ceased interest for things like educating. They treat it like garnish. Certainly, undergrads paying big bucks to go to a highly-ranked research university are mostly wasting their money (providing, of course, they are there for said education).

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    They are there for credentials.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    They are there for credentials.

  • helen

    Some of them are there for die verse it y but they can get “honor” scholarships for a C+ so they have less trouble with student loans than the kids who are paying extra to cover those scholarships.

    The “out of state” students pay much more… which is why Rick’s “in state tuition for aliens” rankles.

  • helen

    Some of them are there for die verse it y but they can get “honor” scholarships for a C+ so they have less trouble with student loans than the kids who are paying extra to cover those scholarships.

    The “out of state” students pay much more… which is why Rick’s “in state tuition for aliens” rankles.

  • Dust

    having taught over 10 years at institutions of higher ed, both public and private, secular and christian it is my opinion they are a total rip off for most of the students, except for maybe the very, very top kids and top schools and then they are way too expensive. am not sure how to fix it, but this is as good a start as any…to at least get the discussion on the front page for a day or two, and then hopefully not fade away?

  • Dust

    having taught over 10 years at institutions of higher ed, both public and private, secular and christian it is my opinion they are a total rip off for most of the students, except for maybe the very, very top kids and top schools and then they are way too expensive. am not sure how to fix it, but this is as good a start as any…to at least get the discussion on the front page for a day or two, and then hopefully not fade away?

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  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    The important credentials are the ones that can’t be inflated like the bar exam. It is the same for everyone. Pensacola Christian has a top nursing program, not because it is expensive or prestigious, far from it, but because it delivers results. You can’t fake the quality of your graduates. It quickly becomes obvious if you are just selling credentials, which many institutions are. People need credentials to get job interviews. Credentials are overrated but ability is not. People see that able people get better jobs and earn more. Education correlates with ability but education doesn’t create ability. That is why the military tests everyone with exactly the kinds of tests that private industry is not allowed to use per Griggs v. Duke Power. The military (aka US gov’t) doesn’t operate under the same rules as the rest of us. They do not have to show that the tests they use are reasonably related to jobs etc. Getting to the point. If all industries could just test applicants for ability, most people could get jobs without credentials because employers wouldn’t have to use expensive credentials as a proxy measure of ability.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    The important credentials are the ones that can’t be inflated like the bar exam. It is the same for everyone. Pensacola Christian has a top nursing program, not because it is expensive or prestigious, far from it, but because it delivers results. You can’t fake the quality of your graduates. It quickly becomes obvious if you are just selling credentials, which many institutions are. People need credentials to get job interviews. Credentials are overrated but ability is not. People see that able people get better jobs and earn more. Education correlates with ability but education doesn’t create ability. That is why the military tests everyone with exactly the kinds of tests that private industry is not allowed to use per Griggs v. Duke Power. The military (aka US gov’t) doesn’t operate under the same rules as the rest of us. They do not have to show that the tests they use are reasonably related to jobs etc. Getting to the point. If all industries could just test applicants for ability, most people could get jobs without credentials because employers wouldn’t have to use expensive credentials as a proxy measure of ability.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Due to constant lawsuits (Ricci, Vulcan Society, Lewis v. Chicago) over who gets to be a fireman based on performance on the tests used by fire departments, soon guys will need college degrees to be firemen. How long till folks need a BA to drive a garbage collection truck?
    Cheap ability test you can take in one day = bad
    Expensive ability test that takes years = good
    Result? More jobs for teachers and college support staff.

    Advanced Degrees for Fire Chiefs
    October 27, 2011 – 3:00am
    By
    Paul Fain
    Aspiring fire chiefs take note — you may need a master’s degree to get that job.
    In the past a firefighter could climb career rungs through experience and training. A degree wasn’t important. But that has changed over the last decade, experts say, as the fire safety industry has followed the lead of corporations and other government agencies, where virtually all top executives hold bachelor’s degrees, and many have advanced degrees.
    Charlie Crowther, associate professor of fire science and emergency management at St. Petersburg College, in Florida, said a college degree increasingly helps firefighters earn more and advance through the ranks.

    Read more: http://www.insidehighered.com/news/2011/10/27/college-degrees-increasingly-help-firefighters-get-ahead#ixzz1c5Utmy34
    Inside Higher Ed

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Due to constant lawsuits (Ricci, Vulcan Society, Lewis v. Chicago) over who gets to be a fireman based on performance on the tests used by fire departments, soon guys will need college degrees to be firemen. How long till folks need a BA to drive a garbage collection truck?
    Cheap ability test you can take in one day = bad
    Expensive ability test that takes years = good
    Result? More jobs for teachers and college support staff.

    Advanced Degrees for Fire Chiefs
    October 27, 2011 – 3:00am
    By
    Paul Fain
    Aspiring fire chiefs take note — you may need a master’s degree to get that job.
    In the past a firefighter could climb career rungs through experience and training. A degree wasn’t important. But that has changed over the last decade, experts say, as the fire safety industry has followed the lead of corporations and other government agencies, where virtually all top executives hold bachelor’s degrees, and many have advanced degrees.
    Charlie Crowther, associate professor of fire science and emergency management at St. Petersburg College, in Florida, said a college degree increasingly helps firefighters earn more and advance through the ranks.

    Read more: http://www.insidehighered.com/news/2011/10/27/college-degrees-increasingly-help-firefighters-get-ahead#ixzz1c5Utmy34
    Inside Higher Ed

  • http://www.bikebubba.blogspot.com bike bubba

    I’m surprised that no one has mentioned the obvious moral hazard here; by limiting the maximum amount a graduate needs to pay, the incentive is given to take lower paying jobs and never get out of hock to the government here. And it’s not like we need smart young college graduates to pursue productive, well paying jobs in this era of economic stagnation, is it?

    Of course, for the sake of the rest of us, that’s exactly the case. If this is the best our government can do, it’s time to get them out of education in toto.

  • http://www.bikebubba.blogspot.com bike bubba

    I’m surprised that no one has mentioned the obvious moral hazard here; by limiting the maximum amount a graduate needs to pay, the incentive is given to take lower paying jobs and never get out of hock to the government here. And it’s not like we need smart young college graduates to pursue productive, well paying jobs in this era of economic stagnation, is it?

    Of course, for the sake of the rest of us, that’s exactly the case. If this is the best our government can do, it’s time to get them out of education in toto.

  • http://www.toddstadler.com/ tODD

    Bubba (@25) … are you serious?

    By limiting the maximum amount a graduate needs to pay, the incentive is given to take lower paying jobs and never get out of hock to the government here.

    Did you read the article?

    The idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years.

    First of all, limiting loans to 20 years kind of negates the whole “never get out of hock” argument.

    But more importantly, in what way does capping repayment rates at 10% incentivize people to take “lower paying jobs”? That makes no sense. Who would be foolish enough to take a job paying $25,000 compared to a job paying $60,000 (or whatever scenario you’re imagining), just so they can pay less in loan payments?

  • http://www.toddstadler.com/ tODD

    Bubba (@25) … are you serious?

    By limiting the maximum amount a graduate needs to pay, the incentive is given to take lower paying jobs and never get out of hock to the government here.

    Did you read the article?

    The idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years.

    First of all, limiting loans to 20 years kind of negates the whole “never get out of hock” argument.

    But more importantly, in what way does capping repayment rates at 10% incentivize people to take “lower paying jobs”? That makes no sense. Who would be foolish enough to take a job paying $25,000 compared to a job paying $60,000 (or whatever scenario you’re imagining), just so they can pay less in loan payments?

  • http://onlineloansapp.com/ apply for a loan

    The high interest attached to these loans can do too much damage to a struggling budget when not paid off on time. All you have to do is enter all of your info and approval can be confirmed in an hour or so.

  • Tom Hering

    I’d say “apply for a loan” @ 53 has earned a permanent block.


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