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Washington Proposes $1 Trillion Bailout for Delinquent Student Loans
November 30, 2012 at 9:17 PM

Washington Proposes $1 Trillion Bailout for Delinquent Student Loans

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29 Nov 2012 293 post a comment

A possible $1 trillion bailout is coming—and soon.

America’s now-nationalized student loan industry just reached a value of $1 trillion, according to Citigroup, growing at a 20 percent-per-year pace. Since President Obama nationalized the industry (a tacked-on provision of the Obamacare bill), tuition has gone up 25 percent and the three-year default rate is at a record 13.4 percent.

Ron discussed this problem last night with Larry Kudlow:

With many young people unable to pay their loans (average graduating debt is about $29,000), Citigroup and others are speculating that this industry might be ripe for a bailout.

To pay off all the current defaults, Citigroup says it would cost taxpayers $74 billion. However, this number doesn’t include those who will default in the coming years, and, when the government rewards the defaulters, it will encourage more borrowers not to pay their debts.

And liberals in Congress have proposed forgiving all student loans via “The Student Loan Forgiveness Act 2012,” costing taxpayers $1 trillion.

Adding another $1 trillion dollars to the national debt isn’t exactly “forgiveness” for young people—it’s prolonging the payoff. In fact, student loan bailouts are a catch-22 for young people because they’re going to be held accountable for paying off the national debt and interest payments.

A student loan bailout will also be rewarding higher education bureaucrats for a diminished product. A college degree used to mean that a person would add on average $1 million to their income over their lifetime. Today a college degree only guarantees an average $300,000 in added income over a lifetime.

The answer isn’t a bailout. The student loan industry must to be returned to the private sector. Would a private lender ever invest $100,000 of their money in a student that had no plan? No.

It’s not about limiting access to college; it’s about making sure students have a well-thought out plan for their future before investors put a $100,000 stake in their education. College should be about specializing in a trade rather than defaulting to general studies that won’t lead to a job.

A civics education is important, but why would an employer hire someone with no applicable work skills, especially in a slow economy?

If we wish to end the incentives for bailouts, we need to hit higher education in the purse. Endless government money and bailouts won’t get our students jobs, and it won’t fix the problem.

Ron Meyer is the press secretary and a spokesman for American Majority Action. Celia Bigelow is the Campus Director for the same organization. Learn more at AmericanMajorityAction.org.

Replies

  • Sisteract
    November 30, 2012 at 9:35 PM

    The problem is there are too few jobs for available workers. Too few jobs in the US- anything and everything that can be turfed outside the US, WILL be turfed- add on the fact that many are having to work until they are 70+ years of age, and there goes MORE available jobs for these young folks. Short of starting your own business (hey, ask your parents for $20,000), kids graduating today are hosed. 

    There is no "safe" degree and many of the more lucrative careers, come with more education and for MOST, MORE debt. Even if there were. "safe" degrees, those avenues would soon be oversaturated too.

  • littlemoments99
    November 30, 2012 at 9:59 PM

    Also if they were to give out bailouts it just lets kids of today think that if they are financially irresponsible or wasteful the government will bail them out. The government is just too big and needs to keep their nose out of our business. My husband paid his way through school. He never took out one loan and worked so he could go to school. He always had a part time job and thankfully didn't have to take a semester off. If the bailouts are given he is going to feel like all that hard work was for nothing. I recieved grants to go to school because my mom makes almost no money and that was the only way I could go. But I have been working all the way through school though. 

  • gsprofval
    November 30, 2012 at 10:18 PM

    Honestly, bailing out these people with student loans doesn't teach any kind of lesson.

    I teach college and there are too many who show up to the first class, then never again because they already have the government financial aid check cashed.

    Another honestly is that too many are in college; it should be a privilege to attend college; too many people should not be in college, but are there just to get those checks. Too many don't have what it takes to get through college (i.e. intelligience and perserverence) and so many don't plan to work any way.

    Yes, I am a tad bit jaded about education the last decade and there is no way these loans should be forgiven.

    Heck, I want all my loans forgiven, my gas and electric bills paid, free food, childcare, oh my car loan paid, too.  This just seems like more entitlement to me.

  • lylalane7275
    November 30, 2012 at 10:28 PM

    Most of my friends have worked their way through, many found jobs that offered tuition reimbursement.  Yes it takes longer, but no debt at the end.  There is also trade school, plumbers and electricians make good money.

    And what's the insititve for future students to pay their loans at all. 

    Oh and plus the fact that we don't have a trillion dollars to spend right now.

  • 29again
    by 29again
    November 30, 2012 at 10:42 PM

    I agree with this article soo much!  Especially this part:  Would a private lender ever invest $100,000 of their money in a student that had no plan? No.

    It’s not about limiting access to college; it’s about making sure students have a well-thought out plan for their future before investors put a $100,000 stake in their education. College should be about specializing in a trade rather than defaulting to general studies that won’t lead to a job.


    I have one in college (sort of.)  She started with a plan, then changed her mind.  She doesn't know what she wants to do now, and well, she's expecting again, so she sees no point in continuing at the moment.  I could just throw a screaming fit at her, but I can't make her go....  I'm really disappointed in her over this, but, what can I really DO about it?  And, to be honest, she didn't have the perseverance that she needs for college.  I just wish she hadn't taken out the loans that she did.  The good thing is that she won't know anything about this proposal, so she won't be part of it.  A small thing, but there it is.

  • _Kissy_
    by _Kissy_
    November 30, 2012 at 11:08 PM


    Quote:

    A student loan bailout will also be rewarding higher education bureaucrats for a diminished product. A college degree used to mean that a person would add on average $1 million to their income over their lifetime. Today a college degree only guarantees an average $300,000 in added income over a lifetime.

  • rccmom
    by rccmom
    November 30, 2012 at 11:27 PM

    I read the article link and according to the article, it does not say to forgive ALL student loans.

    H.R. 4170 would forgive student loan debt for those who have paid 10 percent of their discretionary income toward their loans for 10 years and would cap interest on federal student loans at the current rate of 3.4 percent. Individuals who go into teaching, public service or practice medicine in underserved areas would have their debt forgiven after only five years.

    Still a big chunk of money, I am sure, but the article above didn't seem to point that out.

  • erika9009
    December 1, 2012 at 2:11 AM

    Crap, I paid my student loan off in less than a yr.  What the hell was I thinking...........

  • 143myboys9496
    December 1, 2012 at 7:00 AM

     

    Quoting 29again:

    I agree with this article soo much!  Especially this part:  Would a private lender ever invest $100,000 of their money in a student that had no plan? No.

    It’s not about limiting access to college; it’s about making sure students have a well-thought out plan for their future before investors put a $100,000 stake in their education. College should be about specializing in a trade rather than defaulting to general studies that won’t lead to a job.

     

     

    Just as an example, I know several people last year that graduated from nursing school that couldn't find jobs..how is that their fault?

    More and more hospitals have to do at least the same (if not more) with less. That affects hiring. The hiring of nurses (as an example).

    In-patients are sicker than ever before. The acuity of patient populations has risen, requiring (one would think) the need for more nurses.

    Trust me I know first hand.

    With cuts to Medicare and reimbursement constraints, and the constraints of Obamacare, I don't see it getting better. But I'm willing to wait and see and would love to be proven wrong.

  • 143myboys9496
    December 1, 2012 at 7:02 AM

     I know..my dh and I are truly worried for my eldest son when he graduates.

    Quoting _Kissy_:


    Quote:

    A student loan bailout will also be rewarding higher education bureaucrats for a diminished product. A college degree used to mean that a person would add on average $1 million to their income over their lifetime. Today a college degree only guarantees an average $300,000 in added income over a lifetime.

     

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