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Student Loan Debt: Much Ado About Nothing

It is starting to get quite embarrassing for the Obama administration.  They’re trailing Romney in the polls, they’ve lost the edge with women, and his 2013 budget went down in flames in the Senate today with a final vote tally of 99-0. In the words of Sen. Minority Leader Mitch McConnell, “there’s no education in the second kick of a mule.”Not a single member of the president’s own party supports his budget and this pervasive campaign of self-martydrom should make everyone question Barry’s alleged political acumen.  His latest campaign to recapture the youth vote through anecdotes about his student loan debt will set the stage for another the next battle in the Hill that’s wholly irrelevant.

George Will aptly pointed out in his column that bipartisanship, the ideal that every American yearns to see with our political class, has created more problems that it has solved.

Since 2001, it has produced No Child Left Behind, a counterproductive federal intrusion into primary and secondary education; the McCain-Feingold speech rationing law (theBipartisan Campaign Reform Act); an unfunded prescription drug entitlement; troublemaking by Fannie Mae and Freddie Mac; government-directed capitalism from the Export-Import Bank; crony capitalism from energy subsidies; unseemly agriculture and transportation bills; continuous bailouts of an unreformed Postal Service; housing subsidies; subsidies for state and local governments; and many other bipartisan deeds, including most appropriations bills.

Now, with college debt becoming a salient issue, even though it’s minutae at the end of the day, Congress will haggle over the interest rate which is set to double by July 1.  Hence, the interest rate will increase from 3.4% to 6.8%.  It was cut in half only after the Democrats retook congress in the 2006 midterms and offered plan to subsidize the new rate by “disguising” the cost, as Will notes, as a $60 billion dollar program that now costs $6 billion a year would expire in five years.  Well, the grocery clerk is going to be sent to collect the bill.

In addition, the amount we’re about to fight over is a mere pittance compared to other areas of the federal budget that could be cut, reformed, or complexity dissolved.

The low 6.8 percent rate — private loans for students cost about 12 percent — was itself the result of a federal subsidy. And students have no collateral that can be repossessed in case they default, which 23 percent of those receiving the loans in question do. The maximum loan for third- and fourth-year students is $5,500 a year. The payment difference between 3.4 percent and 6.8 percent is less than $10 a month, so the “problem” involves less than 30 cents a day.

 Moreover, in a nation where the college-educated are grossly outnumbered, I agree with Will that if we are about to pump billions more into education subsidies; it should go to the underprivileged and minority students.  Although, I have my doubts about subsidies for anything.  Additionally, the overwhelmingly non-college educated taxpayers will be subsidizing a rate to keep their more fortunate citizens comfortable in college.  That just doesn’t make sense.   The unemployment rate for college graduates is below 5% and the average debt they leave with is around $25-30,000 dollars.  However, keeping in mind that the average college graduate earns $50,000 a year, it’s a highly manageable position.  Everyone is on a budget.  Nevertheless, we must keep vigilant on Republicans who could put up a soft defense, like George Bush, when this subsidy was first pitched to him five years ago.
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