An education in financial aid

Pete Souza/White House

President Barack Obama greets students during a surprise stop at La Follette High School in Madison, Wis., Sept. 28, 2010.

Article Highlights

  • Obama's latest #ed ploy teaches students that government is here to provide free stuff

    Tweet This

  • Obama introduces a new generation of students to Uncle Sam's gravy train

    Tweet This

  • How can students get the best information on the cost of college?

    Tweet This

The following article is a response to "An Education in Financial Aid" by Fawn Johnson of National Journal

For decades, our nation has spent money we don't have to finance things we want. Republicans have done it to finance tax breaks and military spending; Democrats to pay for discretionary spending and entitlements. The result is reckless deficit spending that is slowly bringing us to a very dangerous pass.

"It used to be that, if you took federal loans, the expectation was that you'd paid them back." - Frederick M. Hess

President Obama came to office pledging that we were done "kicking the can down the road" on this stuff. Well, not so much. His latest ploy is a student lending policy that teaches a new generation of college-goers that government is there to provide free stuff. It used to be that, if you took federal loans, the expectation was that you'd paid them back. (The definition of "loan," after all, entails this whole notion of borrowing and repayment). A couple years ago, the Obama administration decided this was old-fashioned. Now, via income-based repayment (IBR), students could instead limit the loan amount they have to repay Uncle Sam to 15% of their "discretionary" income for 25 years. After that, any remaining obligation would be tacked onto the taxpayers' tab (or really, since we've running deficits as far as we can see, by future taxpayers).

Now, I've no problem with IBR, if it's a break-even proposition and doesn't create yet another new taxpayer subsidy. Unfortunately, that's not the way the Obama administration has pursued it.

Rather, seeing a chance to score additional pander points, the President announced that the obligation would be reduced to 10% of discretionary income for 20 years, with any remaining debt would be forgiven (e.g. paid instead by taxpayers). This was precisely the concern some of us voiced when student lending was nationalized as part of Health Care Reform. We worried it would be tempting for pols to buy the support of borrowers by finding new ways for taxpayers to subsidize borrowers. Me, I'm just waiting for the President to announce-- in October 2012, I suppose-- that he's decided the new repayment rate should be one percent of discretionary income for a year or two. Ahh, nothing says we're "done kicking the can" quite like introducing a new generation to Uncle Sam's gravy train...

Frederick M. Hess is director of education policy studies at AEI

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Frederick M.
Hess

What's new on AEI

With Ukraine, Putin is courting the home crowd
image Ayn Rand vs. Paul Ryan
image Fighting for us: The real stakes in Israel’s war
image Obama failed to stop the Islamic State when he had the chance
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.