Obama’s Student Loan Order Saves Pocket Change

Education costs are rising quickly — and of the many long-term problems the U.S. economy faces, student loans are a significant one. As a result, students will have to borrow more and more money to obtain university degrees and will have a tougher time paying their loans. President Obama seeks to help rectify the crisis with an order that, while commendable in effort, looks to fail to have much impact, writes Daniel Indiviglio at the Atlantic.

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.

Using these values, the monthly savings under Obama’s plan for the average student loan borrower would be between $4.50 and $7.75 per month.

Another change that Obama imposed is a reduction in the cap of disposable income that some former students had to pay.  This modifies a program currently in place to cap some at 15%, which has 450,000 participants at the moment.  But it’s not likely that the expanded program will get expanded participation, writes Ed Morrissey at Hot Air.

It is thought that of all the parts of Obama’s executive order, the loan forgiveness aspect will have the least impact. By moving the timeline from 25 to 20 years, it could be significant in the long run — but it won’t be felt for decades.

But by calling for these measures, President Obama seeks to respond directly to young Americans stressed about their student loans. To take on the student debt problem more aggressively, the president would need, however, some actual legislation that would shake the fundamental framework of the student loan system.

These “savings” are misleading, as future shortfalls are inevitable, writes Annie Hsiao at the National Review. These loans are riddled with risk. When pressed by a reporter about why students would want to pay back the loan if they will be forgiven anyway, Secretary Duncan simply said that “people want to do the right thing.” However, as former CBO director Doug Holtz-Eakin wrote:

“The Secretary of Education is now one of the top financial executives in the U.S., and Congress spent nearly all of the over-estimated ‘savings’ on the President’s health care reform and unaffordable education entitlements and will add more than a trillion dollars of risky loans to the national balance sheet by 2017.”

The president closed his speech by saying, “It’s time to put country ahead of party.”

But more government subsidization of higher education has shown to, as yet, not help students, the economy, or the country. And many are calling for some real reforms and “not just rely on gimmicks”.

The very students he wants to educate won’t have a future if the federal government cannot get its house in order, writes Hsiao.