Colleges: "Thanks! We're raising tuition by $10,000!"
Posted on 06/12/2014 4:16:35 AM PDT by markomalley
Students who took out big loans for graduate school and those with higher incomes stand the most to gain financially under President Obama's expansion of the federal government's loan forgiveness program.
Lawyer, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts.
“You can roll it all into one balance and it has a really powerful effect,” said Jason Delisle, director of the Federal Education Budget Project for the New America Foundation, a nonpartisan think tank. “The chances that you will fully repay your grad school debt are very slim.”
Obama on Monday signed an executive order that expands to as many as 5 million people a program allowing federal student loan holders to cap monthly payments at 10 percent of adjusted gross income. The program also includes debt forgiveness after 10 years for those who work for 501(c)(3) non-profits or in the public sector. For those in the private sector, they can stop paying off their loans after 20 years. The program already exists for those who took out federal student loans after Sept. 30, 2007. The expansion will offer it to all federal borrowers. At the White House on Monday, Obama outlined the plan in remarks geared toward loan holders with debt from four-year colleges, who he noted on average have nearly $30,000 in loans to repay when they graduate. Obama said he had less sympathy for those, who like himself, took out big loans to pay for law school. “That made sense because the idea was if you got a professional degree like a law degree, you would probably be able to pay it off,” Obama said. “And so I didn’t feel sorry for myself or any lawyers who took on law school debt.” But Delisle argues that Obama has essentially encouraged law school loans, and even an extra year of study for law students seeking specialty degrees, who know if they take a public-sector job, they’ll never have to pay back the fourth year or perhaps any of their law degree funding. A lawyer with $150,000 in combined undergraduate and law school loans at a 6 percent interest rate, for example, could walk away from the law school debt by going to work in the public sector with a starting salary of $70,000. Even with a 4 percent raise each year, the public defender or prosecutor who makes on-time payments and utilizes the monthly loan payment cap and 10 year forgiveness program will escape having to pay $187,000. The rest would be picked up by the government. For undergraduates, the forgiveness factor is much smaller. That’s because the average undergraduate student loan of $29,000 is more likely to be all or nearly paid off in a 10 or 20 year time span, say experts. Under the law, undergraduate borrowing is mostly limited to $30,000. There is no limit on graduate school borrowing, which is $58,000 on average. “So this is an interesting wrinkle," said Neal McCluskey, associate director of the Center for Educational Freedom at the Cato Institute, a libertarian think tank. “This executive order is probably going to make very little difference for undergraduate students,” McCluskey said. “For the average person with regular undergraduate debt, they will have paid off most of that in ten years or 20 years. Where it really becomes powerful is for graduate student debt.” The program aims to do more than just forgive debt. It will allow graduates who pay on time to make payments based on their salary. It’s a move that proponents say will help young people escape crippling monthly loan dues that prevent them from living independently, buying homes or otherwise investing in their own future. The program also aims to help attract talent to public sector jobs, which tend to pay less than work for private companies. “I think it makes a lot of sense to use it as a way to participate in high-demand fields that just don’t pay well, like public school teaching," University of Wisconsin-Madison professor Nick Hillman, an education policy expert, said. But Hillman said the program Obama expanded on Monday has so far been poorly executed, is hard for loan holders to access and has never been analyzed by the government to see if it is actually working. “It’s like apple pie,” Hillman said. “Who couldn’t like that idea? But you start to dig for that evidence that it’s working and it’s really kind of flimsy.” DeLisle points out that the federal government already offers a similar program to all borrowers, capping the monthly payments at 15 percent of salary and including the loan forgiveness timetable. The new program merely lowers the cap by another five percent. The difference is likely to be small for many borrowers, but will be much more generous for those who earn bigger salaries, he said. For someone earning $27,000 in adjustable gross income, for example, the average loan payment will drop from $128 per month to $85 per month. But for someone earning $80,000 per year, payments will plummet over $200 per month, from $619 to $412. “The people who will see the biggest reductions are people earning higher incomes,” Delisle said. “That is the effect of this change. You put that together with the loan forgiveness, and this is tailor-made for graduate students.”
RATS buying educated voters
The ‘Rats are merely merely doing the buying.
We do the paying.
Get Ready for Insurer Bailouts Under Obamacare
Taking Taxpayers Out for a Ride
They don’t call it ‘Government Motors’ for nothing.
Obama’s Outrageous Decision to Fund Hamas-Aligned Palestinian Regime
The true cost of the bank bailout
September 3, 2010
“But it turns out that that $700 billion is just a small part of a much larger pool of money that has gone into propping up our nation’s financial system. And most of that taxpayer money hasn’t had much public scrutiny at all.
According to a team at Bloomberg News, at one point last year the U.S. had lent, spent or guaranteed as much as $12.8 trillion to rescue the economy. The Bloomberg reporters have been following that money. Alison Stewart spoke with one, Bob Ivry, to talk about the true cost to the taxpayer of the Wall Street bailout.”
http://www.pbs.org/wnet/need-to-know/economy/the-true-cost-of-the-bank-bailout/3309/
And people are gonna get upset with helping out college graduates??? I got no problem with this. I much rather help out struggling college grads than all those mentioned above.
“public sector jobs, which tend to pay less than work for private companies”
This is BS
Why do you think it's okay for these students who took the loans to steal from the US taxpayer instead of meeting their financial obligations?
Unforgivable.
You must have ignored my articles about bailouts.
And no colleges are inexpensive for the poor working class. My point is who I would prefer to bail out. Not Wall St., no GM, not Hamas, not insurers, not Detroit - young people who are struggling to find jobs.
You are missing the point: If the government is going to continue to use the colleges to indoctrinate and subsidize their ‘class’ then NO WAY are my tax dollars going to subsidize it.
Put the debt ‘on hold’, stop penalties & interest perhaps, but NO FORGIVENESS! PERIOD.
There are consequences for lousy choices. The direct analogy to this is paying a misbehaving child their allowance and/or giving them candy. I don’t care how old the ‘child’ is now...they can take responsibility for their school and, by consequence in most cases, their ‘voting’ choices.
This is not a political matter; it’s an ethical one.
“There are consequences for lousy choices.”
Unless you are an big banker, auto exec, democratic city, health insurer...
And since when do we get to decide where our tax dollars go? I’m against a lot of things but when I file my taxes, I don’t get the check a box of where I want my money spent, unless it’s $1 for presidential elections.
Why do you hate people who tried to get an education?
Why is it okay to throw away trillions of dollars for wars that kill young people but not try to help them financially?
And not all colleges/universities are liberal.
Public sector law is nice work, if you can get it. Fact is, you can't. Much of this type of work is being contracted out now.
Colleges: "Thanks! We're raising tuition by $10,000!"
Government requires children to attend school and taxpayers pay for it. Why not college, too, for those who qualify?
Not that the GOP has the guts to do this,
But if the GOP could win more than just the off year backlash elections (2010, 2014) then couldn't they just change the law such that those same people have to pay that $$$ back after all?
I know there's a couple of hypotheticals in that.
OF COURSE they are! A combination of two years at community college for an Associate's Degree, then night school or online courses to complete the BA while holding a job avoids college debt. Military Academies and ROTC programs used at schools one can commute to pay for college. For the truly qualified, they can take their qualifications to a school that's excellent but not top tier and get scholarships instead of loans. Students can develop a job school such as basic accounting or with a one-year tech degree (often offered through high schools) and use the money they can make to pay for school.
If they're not qualified for any of these, college loans are just a huge scam....a transfer of wealth to the academia elite, to spend their whole privileged lives in their ivy-covered bastions of liberal manipulation.
The statistics about how college vs non-college grads do don't tell the whole picutre. The top quarter of HS grads seem to put together excellent lives. The bottom quarter of college grads tend to end up with useless degrees.
Classic credit bubble. Now how do we short it? ;-)
But 10% of zero is zero, and stay at home moms earn zero.
No different from the GOP bailed out Wall Street banks. The gov brought all their tozic mortgages and notes and gave them newly printed money to loan out to the economy and consumers hoping to jump start the economy. CEO used it to get bonuses and invest in the stock market in lieu of the US economy. Atleast a taxpayer bailout of student loans will free up the student to consider moving out of parents home, settle down and buy a home. Don t get me wrong, both involve a bailout at taxpayers expense, but one group took our money and kept it for themselves, while the other group may use the relief to move on with their lives, get marry and buy homes and eventually stimulate Main Street economy.
I feel like a chump making my children go to public universities and work their way through so the can graduate debt free.
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