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Obama’s Student Loan Plan Won’t Do Much to Help Economy or Students

So this is one of Obama’s fabulous job-creation proposals that the do-nothing Republican Congress just refuses to pass out of sheer partisan self-interest? A job creation executive order that will hand students the grand, economy-boosting sum of $4 to $8 extra per month, according to The Atlantic’s Daniel Indiviglio:

Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student 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.

This isn’t a job-creation proposal, and it’s not even something that will end up helping the students its trying to reach.

You can argue that putting money back in students’ pockets will ensure that they consume more. But an additional $4 to $8 per month certainly isn’t going to inspire any spending sprees – and it’s definitely not going to make their debt burden easier to manage. This is basically nothing more than a purchased talking point for Obama, so that he can declare on the campaign trail that he took action to relieve student debt.

And as Ed Morrissey points out, the new repayment plan won’t even be accessible to most students, at least not if they took out federally-guaranteed private sector loans:

The problem here is that Obama can only relax repayment schedules for direct loans, where the federal government loaned the money directly to students. Until last year, most loans came from the private sector, guaranteed by the federal government but still managed by the private lenders.  Obama and a Democratic Congress eliminated the guarantees in their “reform” of the student-loan industry, a reform that wipes out the “industry” entirely and forces students to deal directly with government instead. Without getting Congress involved, Obama can’t do anything about the private sector loans.

While students won’t feel much of an impact from Obama’s plan, taxpayers certainly will down the road. Obama has shortened the time period that students must pay the loans before they’re forgiven to 20 years, down from 25. Which means less of the debt will be paid off by the loan recipients, placing an additional burden on taxpayers.


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