So, is Obama’s student-loan executive order actually going to do anything to mitigate rising tuition prices?

posted at 5:01 pm on June 10, 2014 by Erika Johnsen

Noah already covered the reliable Republican-bashing optics of President Obama’s latest attempt to rope in young people with the allure of super-free stuff, but I just wanted to take a quick look at the unintended-yet-entirely-predictable consequences of the White House’s oh-so-munificent executive action that is ostensibly meant to lessen students’ debt burdens. Via WaPo:

In an attempt to further ease heavy college debt, President Obama on Monday signed an executive order allowing millions of student-loan borrowers to cap their payments at 10 percent of their monthly income.

Flanked by students and recent graduates who borrowed money to go to school, Obama said the cost of college and burden of student debt are suffocating middle-class families and putting students at an economic disadvantage before they enter the workforce. …

Most student-loan borrowers already have the option to limit payments to 10 percent of their income under recent legislation and regulations. Obama’s order on Monday extended that option to about 5 million others who were not covered by the previous changes, including those who took out loans before October 2007. …

Obama has publicly endorsed legislation sponsored by Sen. Elizabeth Warren (D-Mass.) that would allow students to refinance both public and private loans at lower interest rates. It would be paid for by closing a tax loophole available to the wealthy.

The real, most fundamental problem with crushing student loan debt is, of course, that it is so very crushing. Traditional college tuition prices have been on a continuous upswing far outstripping inflation for going on several decades now, largely helped along by the fact that the federal government has stepped in as a cheap and indiscriminate lender to anyone and everyone looking for any type of student loan.

President Obama’s executive order is a relatively small item, but it certainly isn’t going to do diddly squat to help pay down the more than $1.2 trillion debt bubble currently plaguing students, and nor is sending out the precisely wrong message to future borrowers: We’re going to make it even easier than it already is for you to take out even more and even bigger loans. How do you suppose colleges and universities will respond to that message? By, in turn, raising their prices, perhaps? And might apparently cheaper loans factor into potential students’ personal cost-benefit analyses when evaluating their education/career ideas and future prospects, perhaps tipping the scales in favor of less wise investments? Even worse than Obama’s executive order, however, is Sen. Warren’s proposed legislation, which is an even larger item that creates even more of these perverse incentives.

Neal McCluskey at the Cato Institute hit the nail on the head here:

In the name of helping them, federal politicians, and many other people, massively oversell higher education to the detriment of students. Perhaps as much as half of people who enter college don’t finish; a third of people with a bachelor’s degree are in jobs not requiring the credential; underemployment is even worse for graduate-degree holders, and; cheap college has almost certainly fueled credential inflation, not major increases in knowledge or skills.

Decreasing what borrowers will repay means taxpayers – who had no choice in whether the loans were made – have to make up the difference. And there is a little matter of being nearly $18 trillion in debt already.

There is no such thing as a free lunch, or a free education at a liberal arts college for that matter — and teaching students otherwise is not doing them any favors.


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Just the opposite – ease the burden – you raise the price. Duh !!!

jake-the-goose on June 10, 2014 at 5:05 PM

Only when he gives up and lets private lenders do the job will the system work better, all around. Duh.

MTF on June 10, 2014 at 5:07 PM

Just the opposite – ease the burden – you raise the price. Duh !!!

jake-the-goose on June 10, 2014 at 5:05 PM

Absolutely. Keep crankin’ out the federally insured impossible to pay back student loans so they can eventually be forgiven at the expense of the taxpayer.

hawkeye54 on June 10, 2014 at 5:08 PM

Mother of all bailouts in 5, 4, 3, ……

D-fusit on June 10, 2014 at 5:09 PM

hawkeye54 on June 10, 2014 at 5:08 PM

Yep – the basics of supply and demand seems to have escaped this White House.

…. or maybe they understand that principle perfectly – hmmm

jake-the-goose on June 10, 2014 at 5:10 PM

If the public school system – especially colleges – are the embodiment of everything the left projects on to “evil corporations”.

gwelf on June 10, 2014 at 5:10 PM

Yep – the basics of supply and demand seems to have escaped this White House.

…. or maybe they understand that principle perfectly – hmmm

jake-the-goose on June 10, 2014 at 5:10 PM

Perhaps the system will work better if college costs don’t require student loans in the first place. The loans are simply guaranteed incentives for educational institutions to spend like crazy on anything but providing the best quality education that will provide the best means for employment after graduation for its students, the last priority for spending on campus, it seems.

hawkeye54 on June 10, 2014 at 5:13 PM

…. or maybe they understand that principle perfectly – hmmm

jake-the-goose on June 10, 2014 at 5:10 PM

I have the feeling nothing escapes the understanding of this WH. Bammy and Slow Joe perhaps, but not those who actually run things.

hawkeye54 on June 10, 2014 at 5:14 PM

I recall, about six-seven years ago now, getting a job with a rapidly growing company that had a number of divisions. One of those divisions, the one that pretty much funded the rest of the company, was a student loan servicing bit.

The Feds came in and issued regulations that basically drove that arm of the company out of business.

Shortly afterwards, my entire department was downsized. Fascist Feds.

Vanceone on June 10, 2014 at 5:15 PM

So, is Obama’s student-loan executive order actually going to do anything to mitigate rising tuition prices?

No – next question?

Infidelius on June 10, 2014 at 5:16 PM

The real issue is that the “education” isn’t worth the cost.

But we can’t talk about that.

Instead we have to keep shoveling public funds and heaping debt on students to keep the Communist Ivory Tower going.

gwelf on June 10, 2014 at 5:17 PM

The world needs more Gender Studies and Colonialism graduates so lets keep shoving money into the education black hole.

gwelf on June 10, 2014 at 5:18 PM

Just the opposite – ease the burden – you raise the price. Duh !!!

jake-the-goose on June 10, 2014 at 5:05 PM

Absolutely. Keep crankin’ out the federally insured impossible to pay back student loans so they can eventually be forgiven at the expense of the taxpayer.

hawkeye54 on June 10, 2014 at 5:08 PM

Thirded. :)

22044 on June 10, 2014 at 5:21 PM

****************** 10% BayBee ***********************!!

canopfor on June 10, 2014 at 5:21 PM

Mark Knoller @markknoller · 26s

Pres Obama with Tumblr Founder/CEO David Karp discussing student loans. (CBS photo by Erick Washington) pic.twitter.com/7WMGIfm2Ja
Embedded image permalink
View more photos and videos

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Mark Knoller @markknoller · 14s

Pres Obama asks for support of Senate bill to allow re-financing of student loans at today’s lower rates.

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Mark Knoller @markknoller · 31s

“Is this a good investment,” asks Pres Obama about going to college? “It absolutely is,” he says, citing avg $28,000 diff in annual income.

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Mark Knoller @markknoller · 36s

On Tumblr, Pres Obama urges young people not to let the prospect of student loan debt keep them from going to college.

canopfor on June 10, 2014 at 5:22 PM

It’s all about the votes, baby!
They don’t call them lo-fo voters for no reason!

Tard on June 10, 2014 at 5:23 PM

Simple solution: tie the loan conditions to the employment prospect of the student’s field of study. Graduating with a degree in chemical engineering? Generous loan conditions. Graduating with a degree in transgender architectural history? Lots of luck securing a loan.

Kills several birds with one stone. Students face the reality of the market while in school and are encouraged to get degrees in majors in which they can pay off their student loan.

Professors with BS degrees suddenly find themselves with empty classrooms and are not retained.

PackerBronco on June 10, 2014 at 5:24 PM

https://twitter.com/markknoller

Mark Knoller @markknoller · Jun 9

Pres signed memorandum directing @arneduncan to make another 5-million eligible to cap student loan monthly payments at 10% of income.

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Mark Knoller @markknoller · Jun 9

Pres Obama takes his student loan policy to Tumblr tomorrow: “I have two teenage daughters so I am hip to all these things” like Tumblr.

Mark Knoller @markknoller · Jun 9

Pres Obama says it would be “scandalous” to allow tax loopholes for the rich while not helping student loan borrowers deal with their debt.

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Mark Knoller @markknoller · Jun 9

Pres Obama calls Senate student loan bill “a no brainer” – a choice between lower tax bills for millionaires or lower student loan bills.

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Mark Knoller @markknoller · Jun 9

Pres Obama says more young people earning college degrees than ever before – but too many end up with too much student loan debt.

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Mark Knoller @markknoller · Jun 9

At student loan debt event, Pres Obama says “no young person in America should be priced out of a college education.”

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Mark Knoller @markknoller · Jun 9

In WH briefing, @arneduncan says contracts of college coaches should be tied to students getting their degrees, not games won or lost.

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Mark Knoller @markknoller · Jun 9

Duncan says Pres Obama today signing memorandum to make another 5-million eligible for cap on college loan debt to 10% of income.

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Mark Knoller @markknoller · Jun 9

Duncan calls college educaton the “single most important investment” Americans can make in the future.

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Mark Knoller @markknoller · Jun 9

Despite higher costs of college and student loan debt, Educ Secy @arneduncan says higher education “is absolutely worth it.”

Mark Knoller @markknoller · Jun 9

The presideng signs the student loan action after remarks in the East Room at 145pm/ET. WIll be livestreamed at http://www.whitehouse.gov/live
View summary

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Mark Knoller @markknoller · Jun 9

WH says the president’s action will expand the 10% cap option on student loan payments to an additional 5-million borrowers..

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Mark Knoller @markknoller · Jun 9

Pres Obama takes executive action today to permit another 5 million student loan borrowers to cap their monthly payments at 10% of income.

canopfor on June 10, 2014 at 5:25 PM

PackerBronco on June 10, 2014 at 5:24 PM

Interesting

jake-the-goose on June 10, 2014 at 5:26 PM

Of course not, or else he wouldn’t have ignored it. This is only aboutthe midterms.

ezspirit on June 10, 2014 at 5:28 PM

Barack Obama
12m
President Obama, in Tumblr session, on shootings: ‘We’re the only developed country in the world where this happens’ – @USATODAY
Read more on usatoday.com
=========================

President Obama talked about student loans and made an emotional argument about the need to address gun violence in American during a Tuesday session on the social media website Tumblr.

Some highlights:

5:07 p.m. — Over and out: “I’ve had a great time,” Obama tells Tumblr users.

5:05 p.m. — Obama says he knows one thing he’ll do after his second term is over: “I’ll be on a beach somewhere.”

But that won’t last long, he adds, saying he wants to work with young people among other things during his post-presidency.

“Guard against cynicism,” Obama tells Tumblr users.

5:00 p.m. — The topic of school shootings comes up, as a questioner says he knew the college student who went on the recent deadly shooting spree in California.

Obama says the nation has to figure out a way to keep guns out of the hands of mentally unstable people.

“We’re the only developed country in the world where this happens,” Obama says of mass shootings. “And it happens every week.”

Gun violence in America is “off the charts,” Obama says.

He notes that Australia enacted gun control laws after a single mass shooting, and hasn’t had one since.

Obama again stumps for improved background checks, but says too many lawmakers are “terrified” of the National Rifle Association. But he noted that “a fundamental shift in public opinion” is needed before Congress takes action.

While some people say mental illness is the problem, Obama said “the United States does not have a monopoly on crazy people.”

The problem is availability of guns, Obama said, and “this country has to do a lot of soul searching.”

4:51 p.m. — Another issue surfaces: A proposed increase in the minimum wage. Obama talks about the need for more vocational education, from plumbers to carpenters.

4:45 p.m. — Obama urges Tumblr voters to support a Senate Democratic plan that would, theoretically, help students lower debt loads by using new government loans — at lower interest rates — to pay off existing private loans. Republicans call the plan a gimmick, and have vowed to block it.

4:42 p.m. — Obama discusses his administration’s plans for college “scorecards,” ranking schools in various ways.

4:37 p.m. — Tumblr users are asking Obama for career advice, and what kinds of college majors they should pursue.

Obama talks up math and science, but says everybody is different, and people should pursue work “at something you care deeply about.”

4:32 p.m. — Obama stresses the need for more math and science education, while joking about the fact that he was a humanities major.

“The thing about humanities is you could kind of talk your way through classes,” Obama notes at one point.

He adds that getting a math or science education “doesn’t preclude you from writing haiku at some point.”

4:28 p.m. — Obama highlights the key part of his student debt relief program: Payments can be capped at 10% of income. He signed an executive order Monday for an expansion of that rule.

Not a lot of people know about this program, Obama says, and “I hope that the Tumblr community spreads the word.”

4:25 p.m. — Early questions focus on the rising costs of college — and one likens Obama’s proposals to help with loan repayments to “a band aid on a broken leg.”

Obama also cracks wise about the Tumblr handle of one questioner: “Haiku Moon.” It could be her real name, Obama muses, adding that “that’s a cool name.”

4:15 p.m.– We begin about 15 minutes late, and President Obama explains his reasons for doing Tumblr.

http://www.usatoday.com/story/theoval/2014/06/10/obama-tumblr-student-loans-question-and-answer-david-karp/10288945/

canopfor on June 10, 2014 at 5:29 PM

The Plan:

Ensuring That Student Loans are Affordable

http://www.whitehouse.gov/sites/default/files/100326-ibr-fact-sheet.pdf
*********

“Let’s tell another one million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years –- and forgiven after 10 years if they choose a career in public service, because in the United States of America, no one should go broke because they chose to go to college.” – President Barack Obama, January 27, 2010

A year ago, President Obama set a national goal: by 2020, America will once again have the highest proportion of college graduates in the world. But because of the high costs of college, about two-thirds of graduates take out loans with an average student debt of over $23,000. This debt is particularly burdensome for graduates who choose to enter lower-paying public service careers, suffer setbacks such as unemployment or serious illness, or fail to complete their degree.

To ensure that Americans can afford their student loan payments, the Health Care and Education Reconciliation Act gives student borrowers new choices in how they repay their loans. The initiative was developed by the Middle Class Task Force chaired by Vice President Biden, and it will expand the income-based repayment plan for federal student loans that was put in place last summer. More than 1.2 million borrowers are projected to qualify and take part in the expanded IBR program.

Under this new law, students enrolling in 2014 or later can choose to:

Limit Payments to 10 Percent of Income: Borrowers choosing the income-based repayment plan will pay no more than 10 percent of their income above a basic living allowance, reduced from 15 percent under current law. The basic living allowance varies with family size and is set at 150 percent of the poverty line, currently equaling about $16,500 for a single individual and $33,000 for a family of four.
More than 1 million borrowers would be eligible to reduce their monthly payments.
The payment will be reduced by more than $110 per month for a single borrower who earns $30,000 a year and owes $20,000 in college loans, based on 2009 figures.
Forgive Any Remaining Debt after 20 Years, or after 10 Years for Those in Public Service: Borrowers who take responsibility for their loans and make their monthly payments will see their remaining balance forgiven after 20 years of payments, reduced from 25 years in current law.
Public service workers – such as teachers, nurses, and those in military service – will see any remaining debt forgiven after 10 years.
Fully Funded by Student Loan Reforms: These new initiatives are funded by ending the current subsidies given to financial institutions that make guaranteed federal student loans. Starting July 1, all new loans will be direct loans delivered and collected by private companies under performance-based contracts with the Department of Education. According to the non-partisan Congressional Budget Office, ending these wasteful subsidies will free up nearly $68 billion for college affordability and deficit reduction over the next 11 years.

These proposals are part of the Obama-Biden Administration’s ambitious agenda to make higher education more affordable and to help more Americans earn college degrees. This agenda includes:

More than doubling funding for Pell scholarships between 2008 and 2011.
Tripling the largest college tax credit – the American Opportunity Tax Credit.
Increasing investments in America’s community colleges, Historically Black Colleges and Universities and other Minority Serving Institutions.
Simplifying the federal student aid application (FAFSA) making it easier to apply for college financial aid.

http://www.whitehouse.gov/issues/education/higher-education/ensuring-that-student-loans-are-affordable

canopfor on June 10, 2014 at 5:34 PM

So if you’re a student or the university do you really care what the tax payer gets stuck with once you get to that point where OBAMA has declared you owe no more?

Who forced you loan takers to sign for those loans? Grow up. Man up.

CW on June 10, 2014 at 5:40 PM

So, is Obama’s student-loan executive order actually going to do anything to mitigate rising tuition prices?

Hint: No.

You’re wrong about that Erika. It’s going to spike them even faster.

DFCtomm on June 10, 2014 at 5:42 PM

So, is Obama’s student-loan executive order actually going to do anything to mitigate rising tuition prices?

The opposite, of course.

Just like government grants for college mean the college can raise its tuition rates. And just like health insurance means health care costs increase.

Of course, that’s exactly the point, isn’t it. Universities get more money, government gets credit for ‘caring,’ and taxpayers … well, that’s where it breaks down.

There Goes the Neighborhood on June 10, 2014 at 5:43 PM

From NPR this morning:

HORSLEY: Just ask twenty-seven-year-old Melissa Regele of Omaha. She’s paying about $1,000 a month on her student loans. That’s a pretty big chunk out of a Catholic school teacher’s paycheck.

MELISSA REGELE: When I sent out my little pie graph of how much I spend, my largest allotment is for my student loan.

HORSLEY: Regele’s total debt for her Bachelor’s and Master’s degree exceeds $160,000. She says that’s a bit of a roadblock when it comes to thinking about next steps with her boyfriend of four years.

Abelard on June 10, 2014 at 5:46 PM

It would be paid for by closing a tax loophole available to the wealthy.

Which would be?……the 30% they get to keep.

Or maybe requiring yachts to be registered in your own state of residence?

WryTrvllr on June 10, 2014 at 5:47 PM

Get out your wallets peoples.

CW on June 10, 2014 at 5:47 PM

I missed the part where people were forced by gunpoint to sign up for these loans.

CW on June 10, 2014 at 5:49 PM

NO!

As the interest goes down the cost will go up and keep the level of financial pain level or more. Remember that whatever Obama says a policy will do, it will in action do the exact opposite.

For example: Patient Protection and Affordable Care Act. It does neither.

jukin3 on June 10, 2014 at 5:50 PM

No, silly.

The objective here is redistribution of cost – from the student to the chump taxpayer.

LilyBart on June 10, 2014 at 5:52 PM

He adds that getting a math or science education “doesn’t preclude you from writing haiku at some point.”

No , but a humanities major pretty much guarantees you’ll have zero input on the unified field theory.

(that whole post was a joke, right?? please??)

WryTrvllr on June 10, 2014 at 5:53 PM

Gun violence in America is “off the charts,” Obama says.

Charts. Humanities major. Got it.

WryTrvllr on June 10, 2014 at 5:55 PM

Speaking of School:

https://twitter.com/AP_Politics

AP Politics @AP_Politics · 5m

White House threatens veto of GOP school meal bill, reports @MCJalonick http://apne.ws/SwAdPY

canopfor on June 10, 2014 at 6:04 PM

Get out your wallets peoples.

CW on June 10, 2014 at 5:47 PM

Forget the wallets. They aren’t near enough. They want your bank accounts, investment accounts, 401ks, and IRAs, and your house as well. You got ‘em, so many deserving people don’t. Equality for all.

hawkeye54 on June 10, 2014 at 6:15 PM

The objective here is redistribution of cost – from the student to the chump taxpayer.

LilyBart on June 10, 2014 at 5:52 PM

That’s pretty much the objective of all Bammy’s costs. Middle class taxpayers are the biggest chumps of all.

hawkeye54 on June 10, 2014 at 6:16 PM

So why did I WORK to go to school. I could have stayed back, partied, did and studied what I wanted and not have to worry about anything. Gee, I sure was the fool.

Tinker on June 10, 2014 at 6:24 PM

No.

Just the opposite – ease the burden – you raise the price. Duh !!!

jake-the-goose on June 10, 2014 at 5:05 PM

It’s almost as though they don’t teach economics at Occidental, Columbia or Harvard.

talkingpoints on June 10, 2014 at 6:24 PM

But…but…but you NEED “education equality” and “income equality”.

Just don’t ask a freaking liberal what that means. They haven’t a clue.

GarandFan on June 10, 2014 at 6:50 PM

…show me the money!

KOOLAID2 on June 10, 2014 at 7:00 PM

There’s quite a bit wrong with colleges and college campuses today, but one under reported aspect of tuition increases has been declines in state funding for public higher education. The old bargain used to be that the state governments would use tax money to provide most of the operating budget of a university, and as a result tuition was low since little of the actual cost fell on students. Over the last 20 years however, states have cut funding for colleges quite a lot, in some cases explicitly telling colleges to raise tuition to cover the difference.

In short, the market was already distorted by direct state funding of colleges. It was always terribly expensive to go to college, it’s that the “costs” were more hidden because the state paid so many of them directly without the student having to dip into their own pocket. Now the costs have shifted to students and are again distorted through federally backed student loans.

AngusMc on June 10, 2014 at 7:15 PM

Obama gesture will make tuition rates climb even faster.

sadatoni on June 10, 2014 at 8:10 PM

Of course, O cares not about the Constitution, but how is this Constitutional?

Congress is supposed to have the power of the purse.

Yet, O sticks the taxpayer with billions of additional cost.

Carnac on June 11, 2014 at 9:55 AM