President Barack Obama has decided to leave a lasting impression before he exists office. Obama has put in place a student debt forgiveness program which only helps few while costing all excessively. Now as costs of tuition continue to soar, the Obama legacy on higher education reform will clearly be one of economic distress and government overreach.
Thanks to Obama, the federal government is on track to forgive at least $108 billion in student loan debt in the coming years according to the Government Accountability Office. Which, is what happens when the economy does not produce jobs for college graduates because it has been slowing down for 16 years, not growing above 4 percent since 2000. Graduates go for loan forgiveness, because the jobs that there are do not pay for the loans.
According to the Wall Street Journal’s Josh Mitchell, the most generous repayment plans are capped at 10 percent of the borrower’s discretionary income. He continues to note that, “Congress approved the plans in the 1990s and 2000s, and President Barack Obama has used executive actions to extend the most-generous terms to millions of borrowers.”
This has caused the number of students borrowing to skyrocket over the last three years, resulting in a collective debt of $355 billion. The Government Accountability Office (GAO) estimates $137 billion will not be repaid.
The GAO also criticized the Department of Education’s accounting practices, noting that its costs could be off by billions of dollars. These figures also do not include future loans or outstanding interest on current loans which will accrue over time.
However, the financial burden which taxpayers will ensue will only get worse with the further implementation of this program. As explained in a Wall Street Journal editorial in July 2015, each year which had growth in federal student aid for higher education, also saw a rise in tuition prices. This is a surprisingly understandable trend.
The more the federal government has been willing to give, the more schools have been willing to charge.
Consistently since 1987 every time the federal government has raised financial assistance, Universities have raised costs. Not only do colleges increase costs knowing financial aid will act as a cushion, but with the increase in students entering the University there is a necessity for more classrooms and resources, driving up costs significantly.
Finally, the Obama plan does not even provide adequate relief for all those in need, for private sector workers their forgiven amount would be taxed as ordinary income. However, for government workers and those who work for non-profits forgiven debt is listed as tax free income.
Either everyone’s loan forgiveness should tax-free, or nobody’s should be. Government employees and non-profit workers are nothing special, no offense.
The idea of debt-forgiveness is not entirely partisan. Even President-elect Donald Trump has proposed settling payments at 12.5 percent of income and forgiving balances after 15 years. It is Obama’s expansion of current plans and new taxation codes which makes the plan economically unsustainable.
For young Americans with college degrees but who can now not find jobs in the slow-growth economy, they cannot afford to pay off their loans. To them, a student in debt a relief plan sounds amazing. But for a country in debt, this agenda is not the greatest good for the American people. The real solution is not student loan forgiveness, but for the economy to get moving again with robust growth and creating jobs. The government can help that along by reducing the cost of doing business here. And stop telling every American they need a college education when not every job requires one. Otherwise, as universities raise prices the government will be forced to forgive more and more, eventually it is possible higher education will take home mortgages place as highest household liability. Then, even the people who need to go to school for their chosen vocation won’t be able to afford it.