President Obama is doing to the student loan system what he did for the health care system: create a centralized website, get more people (students in this case) dependent on government funds, and hide the costs.
Oh, and bypass Congress by doing it all under executive actions in order to avoid congressional participation and input.
In 2010 Obama signed legislation passed by the Democrat-controlled Congress that essentially removed private lenders and put the feds in the student loan business. It also created the Pay As You Earn loan forgiveness plan, in which repayments are capped at 10 percent of income and 20 years—and only 10 years if the borrower goes to work for the government or a qualified nonprofit organization.
Now Obama is taking another step towards student-loan nationalization. According to one news report, “the Department of Education will establish a single website where all federal loan borrowers can access their account and payment information.” In addition, the government will “create a new online feedback system by next July that allows students and borrowers to file complaints about federal student loan lenders, servicers, collection agencies and colleges and universities.”
When Obama rolled out healthcare.gov in October of 2013 it was a complete disaster. And while the front end of the website was eventually fixed, the back end still doesn’t work.
That complete failure forced Obama to admit that the government doesn’t do technology well. But that realization isn’t enough to stop him from doing it again, for—or should we say “to”—student borrowers.
The government also intends to get into the loan collection business. “It plans to launch a two-year pilot program in which the federal government will directly collect the defaulted debt of a small number of loan borrowers.” Once it controls loan collections, it will be easier to forgive that debt.
As the Wall Street Journal points out, “Buried in the White House budget [for FY 2016] is a $21.8 billion writedown on the government’s student loan portfolio that no one seems to want to mention—perhaps because taxpayers can expect more red ink to come.”
And he plans to accomplish his new government expansion all on his own authority, under executive action.
Obama is engaged in an effort to hook millions of young Americans on government largess early by making it easy to borrow hundreds of thousands of taxpayer dollars to pay for college, with an implicit promise that much of the debt will eventually be forgiven. It’s the worst thing you could do if you’re trying to make fiscally responsible citizens. But then maybe that’s the point.
March 10, 2015