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Government to “Help” Kids in Debt?

Tuesday, June 24, 2014

– CNN Money, June 8, 2014

President Obama will announce on Monday an expansion of a program that helps student loan borrowers manage their debt, a White House official said.

The official said Obama will expand the criteria for an alternative repayment program, which caps monthly payments for certain federal student loans at 10% of a borrower’s discretionary income.

The changes would allow an additional 5 million borrowers to qualify and will be available beginning in December 2015, the official said

The alternative payment programs…include forgiveness programs for on-time payments and public-sector employees. Teachers can have their balance canceled after ten years, for example. Low-income borrowers can have their balance canceled after 20 or 25 years of on-time payments…

Our Response & Your Comments

Today, 60% of Oregon college graduates are faced with an average $26,639 in student debt. Now Pres. Obama’s going to “help” them. Will he? We doubt it. But we believe that the student loan fiasco is a perfect example of The Government Four Step Program:

Step 1: The Government seizes on a problem (rising college tuition) and labels it a “crisis.”

Step 2: Politicians, usually at election time, promise to solve the problem. In the case of college tuition, by loaning kids money to pay it.

Step 3: They make the problem worse by subsidizing it. In this case, by flooding colleges with money to pay tuition that rockets up in price to absorb the extra money. It’s like trying to cure an alcoholic by giving him free Jack Daniels.

Step 4: The worse the problem gets, the harder government encourages people to do what caused the problem in the first place. In our example, they encourage kids to borrow more by making it easier to repay the loans.

President Obama, on behalf of Oregon students we plead “Don’t ‘help’ so much.”

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