Tuesday, May 17, 2016

The Obama Created Student Loan Mess

In 2010, President Obama began a program of federalizing student loans in order to eliminate the banks, whom he saw as merely expensive middlemen, from the process.   However, instead of saving money, as he implied this would do so, student debt has zoomed up 71% since he took office; going from $0.7 trillion to $1.2 trillion.  In the same time period, inflation rose only 10%.

In 2014, the Federal student loan debt went up 517%, to over $740 billion dollars under Obama.  This means that he was able to federalize 62% of all student loans in that year.  No data yet on how much the federal government was carrying in 2015. But, beyond federalizing loans, it appears that the default rate on those loans has risen to 27% after falling for decades to lows under 6% in the years 1999 to 2006.  With default rates as low as 4.5% in 2003 and 4.6% in 2005.  Also,  27% is the highest rate that this country has seen since 1987 when in 1990 default hit a record 22.4%.

The reality here is that the private sector was doing just fine in managing student debt.  The restrictions they placed on borrowing resulted in less debt and less defaults.

The President's free-wheeling federalization of debt has produced the opposite effect because, as usual, the last entity you want involved in managing money is the federal government, who can't even manage its own massive debt problems.  Just think about that when you hear Hillary Clinton and Bernie Sanders touting debt-free, tuition-free college.


Chart Source: Fortune.com: Obama's Economy in 7 Charts: The Good, The Bad, and The Ugly: http://fortune.com/2016/01/12/obama-economy-charts/

Obama's Balloon: Federal Student Loan Debt Up 517% in 5 Years: http://cnsnews.com/news/article/ali-meyer/obamas-balloon-federal-student-loan-debt-517-5-years

Obama’s $1.2 Trillion Student Loan Program Is Falling Apart: http://www.investors.com/politics/editorials/obama-student-loan-program-is-falling-apart/

Study: 27% of Student Loans in Default: http://www.breitbart.com/big-government/2015/04/15/study-over-27-of-student-loans-are-in-default/

Student-Loan Defaults Are Still Soaring Thanks to Washington's Neglect: http://www.theatlantic.com/business/archive/2013/10/student-loan-defaults-are-still-soaring-thanks-to-washingtons-neglect/280158/

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