An education in financial aid

Pete Souza/White House

President Barack Obama greets students during a surprise stop at La Follette High School in Madison, Wis., Sept. 28, 2010.

Article Highlights

  • Obama's latest #ed ploy teaches students that government is here to provide free stuff

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  • Obama introduces a new generation of students to Uncle Sam's gravy train

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  • How can students get the best information on the cost of college?

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The following article is a response to "An Education in Financial Aid" by Fawn Johnson of National Journal

For decades, our nation has spent money we don't have to finance things we want. Republicans have done it to finance tax breaks and military spending; Democrats to pay for discretionary spending and entitlements. The result is reckless deficit spending that is slowly bringing us to a very dangerous pass.

"It used to be that, if you took federal loans, the expectation was that you'd paid them back." - Frederick M. Hess

President Obama came to office pledging that we were done "kicking the can down the road" on this stuff. Well, not so much. His latest ploy is a student lending policy that teaches a new generation of college-goers that government is there to provide free stuff. It used to be that, if you took federal loans, the expectation was that you'd paid them back. (The definition of "loan," after all, entails this whole notion of borrowing and repayment). A couple years ago, the Obama administration decided this was old-fashioned. Now, via income-based repayment (IBR), students could instead limit the loan amount they have to repay Uncle Sam to 15% of their "discretionary" income for 25 years. After that, any remaining obligation would be tacked onto the taxpayers' tab (or really, since we've running deficits as far as we can see, by future taxpayers).

Now, I've no problem with IBR, if it's a break-even proposition and doesn't create yet another new taxpayer subsidy. Unfortunately, that's not the way the Obama administration has pursued it.

Rather, seeing a chance to score additional pander points, the President announced that the obligation would be reduced to 10% of discretionary income for 20 years, with any remaining debt would be forgiven (e.g. paid instead by taxpayers). This was precisely the concern some of us voiced when student lending was nationalized as part of Health Care Reform. We worried it would be tempting for pols to buy the support of borrowers by finding new ways for taxpayers to subsidize borrowers. Me, I'm just waiting for the President to announce-- in October 2012, I suppose-- that he's decided the new repayment rate should be one percent of discretionary income for a year or two. Ahh, nothing says we're "done kicking the can" quite like introducing a new generation to Uncle Sam's gravy train...

Frederick M. Hess is director of education policy studies at AEI

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