Free money does come with a price. In other words, nothing in life is free. This is another scam to bring back college student who support Obama in 2008. Of course, the stupidity of the youth will bite them hard down the road. If the bill passes in Congress, there will be a serious consequences and a never ending vicious cycle. Like the housing bubble, banks gave away loans to anybody interested in buying a house. Doing so, it allowed the price of a home to sky rocket. It is called supply and demand. The effort was nice, but the aftermath led to downfall of the economy. By giving an incentive to default on a student loan, it will allow schools to increase their price. Because inflation makes it harder for the middle-class family to afford paying their own tuition, it will drive them into the government financing program, which, will drive up the cost further still.
(FoxNews) 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 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.
Obama’s move comes at a moment when many economists are warning of a college debt bubble that is distorting college tuition rates and threatening to further damage credit markets. The president’s move is intended to make college more affordable for more people, which will, in turn allow universities to jack up their rates.