The Lowdown on Student Loans: Feds Make Education More Expensive

The Lowdown on Student Loans: Feds Make Education More Expensive

Fresh from promising students that they can have as much sex as they want through his new contraception mandate, President Obama now promises them they can get as educated as they want, for free. 

His website boasts that his administration will “make college affordable for everyone” and his expansion of the Pell Grants will help make college a right, akin to Social Security and Medicare. Of course, Obama doesn’t tell us why he’d only settle at college; the right to, say, free graduate school is presumably not yet on the table. Perhaps in a second term?

No matter–in his bid to bail out the students with bonds, Obama seeks to divorce financial choice from financial consequences, and extend the perpetual adolescence of college-aged students by making them perpetually dependent on the taxpayer. You might say he’s banking on the economic illiteracy of the millennial generation, a generation he has rechristened in his own image, dubbing us “Gen44,” that is, the generation that elected him the nation’s forty-fourth president.

How’s that turning out for us?

Not so good. Half of all college graduates are underemployed or jobless, according to the Associated Press. Maybe that’s why we aren’t so excited to support him this time again. A USA Today/Gallup survey found that only 48% of those aged 18-29 are enthused about Obama in February 2012, compared to 76% in February 2008. With youth unemployment above 20%, it’s little wonder why. 

While President Obama’s website says that he wants everyone to go to college, his policies have made it harder and harder to get educated.  It’s not all Obama’s fault–he didn’t start the fire–but he did add the accelerant. Since 1978, college tuition (the price) has exploded tenfold. In 2009, tuition grew by 6%, four times the growth of overall prices did. And in 2011, for the first time ever, student loan debt ($850 billion) has outpaced credit card debt ($830 billion) and shows no signs of slowing down, especially as Obama lavishes still more money on a failing system.

Which brings us to the student loan issue still in the news cycle this week. Unless Congress acts by July, he tells us, and forces the American taxpayer to fork over another $6 billion for our already bloated higher education system, the interest rate on federal Stafford student loans will double, from 3.4% to 6.8%.  More than 7 million students, he tells us, will be affected. 

Of course, he overstates the case.  The average college debt load today is about the price of a new Toyota Prius, according to Bill McGurn–$28,100 from a private school and $22,000 for those from a public school. No small potatoes to be sure, but hardly all that crippling when the starting wage in the U.S. for a college graduate is just shy of $50,000–that is, if that graduate can get a job in this economy.

Still, Obama, hoping to make political hay of bad news, is sounding the alarm at the Universities of North Carolina, Colorado, and Iowa–three crucial swing states he’ll need to win in November. That’s why he’s targeting Congresswoman Virginia Foxx of North Carolina, whom he deliberately misquoted in–well, North Carolina. 

Ostensibly quoting the Gentlelady from North Carolina, Obama told a college audience:

 She said she had ‘very little tolerance for people who tell me they graduate with debt because there’s no reason for that.’  I’m just quoting here, I’m just quoting.

She said students who rack up student loan debt are just ‘sitting on their butts having opportunity dumped in your lap.’  I’m reading it here. So I didn’t make this up.

There’s just one problem. That’s not the full context of Ms. Fox’s remarks. This is:

“I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Foxx continued. “We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says ‘life, liberty, and the pursuit of happiness.’ You don’t sit on your butt and have it dumped in your lap.”

Of course Foxx, who worked her way through college with her husband, and who was the first in her family to graduate high school, let alone college, knows a thing or two about working your butt off. And besides, those who take out more than $200,000 in debt are a very small sliver of the overall college indebted population. No more than six percent, according to a study by the Fed, take out more than $75,000–to say nothing of $200,000–to pay for college.

Never mind the facts. Now Obama is blaming the Republicans for the consequences of policies he long favored. It was, after all, his administration, working with the Democratic-controlled House and the Democratic-controlled Senate, that took over the student loan industry in 2010 as part of a gimmick to hide the cost of Obamacare. By taking over four-fifths of the student loan industry and saddling the remaining fifth with regulation, Obama has driven up the price of a loan by curbing the numbers of originators who can supply them.

While he may decry “cutting our way to prosperity,” is he really arguing that his Department of Education, which doubled in size and now stands at over $150 billion a year, couldn’t do with a little trimming? If the student loans were so important, why doesn’t he shave off six or so billion from that bloated agency? If we really are “investing in the future,” by investing in education, why not allocate money from the Department of Education?

That is, of course, assuming that it is such a wise thing to send everyone to college in the first place. And here the evidence is very shaky. Indeed, only 53% of four-year college students graduate in six years, according to the American Enterprise Institute. That statistic may, in and of itself, spell doom for Obama’s plan to make America the world’s leader in college graduates. So, too, does the fact that poorer Americans seem to have especially poor graduation rates. According to a University of Michigan study, college-graduates rates vary by income. The New York Times summed up its findings by look[ing] at two generations of students, those born from 1961 to 1964 and those born from 1979 to 1982. By 1989, about one-third of the high-income students in the first generation had finished college; by 2007, more than half of the second generation had done so. By contrast, only 9 percent of the low-income students in the second generation had completed college by 2007, up only slightly from a 5 percent college completion rate by the first generation in 1989.

You would think that President Obama  would do everything he could to boost the numbers of low-income graduates–and yet, his policy is one of demonizing the community colleges and for-profit colleges that educate them. While governments subsidize for-profit colleges, for-profit taxpayers cost taxpayers significantly less and pay taxes–and graduate 12% of all higher-education students, including disproportionate numbers of Hispanics (24%), blacks (25%), and students whose parents did not complete high school (28%). At Kaplan, which is one of the largest programs, higher-risk students graduate at twice the rate–32% versus 17%–at which demographically comparable students graduate from four-year institutions of higher education. Isn’t it more important that workers be educated than that they go to a traditional one-size fits all college? The knowledge workers that Peter Drucker once prophesied may not have to go to college, after all. They need skills, not higher and higher college bills paid for by the taxpayer.

You know it’s an election year when politicians are promising things for free and calling them investments!

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