President Obama was in Boulder this week - vying for support to keep student loan interest rates down.
Let's do the math to see exactly how much he's saving students.
Payment on a 10 year loan of $20,000 at current 3.4 percent interest rates = $197/mo.
Payment on a 10 year loan of $20,000 at possible interest rate of 6.8 percent = $230/mo.
Obama's promise saves students $33/month (14 percent)
The difference in cost is about the same as a night out to the movies ---- about 1 percent of your salary if you make at least $15/hr.
Were I in charge, I'd let the interest rate go up to a sensible interest rate (student loans are unsecured, and are inherently risky). The current 3.4 percent interest rate is inadequate given the cost of money, as well as the risk of default.
Nope - it's not a boon to the banking business ---- the Federal government took over the student loan business. I'd simply prefer the program not to suck money away from other priorities. In order to pay for itself, the loan program needs higher interest rates.
I'm not sure why he's making such a big deal out of savings about the same as a night out to the movies!
Because Obama expects the younger- more ignorant students to vote for him again. He forgets the hatred of Bush- which drove many youngsters to the Obama vote.....
But now that crowd has 4 years of Obama performance to consider- including an economy that has no jobs for them.
He may be able to keep some- but many of these people are less ignorant than they were 4 years ago, and they know that the economy still sucks.
I really think that this class warfare stuff is just a distraction from the massive tax increase that Obama planned for the middle class- keep the masses hating on those billionaires while you cut every tax credit and deduction, and raise every tax possible. The democrats got all this done during the first two years of Obama's term- and they are all set to kick in just after the election this year!
BB,
Interesting analysis. And great point about a unsecured loan. My Sister-in-law dropped out in the early 80's and has been paying her loans off since them. Mainly they just garnish her income tax refund. She expects to die with it on the books.
Thomas Sowell: There are no solutions, just trade-offs.
Good post...and it will be an effective strategy based on what we see when anything is offered for free or at a discount. If people will trample each other to get a $10 toaster they probably could live without, think about how easy it is to walk into a voting booth to get yourself $33 a month. (plus you could then add HBO, Stars, and Showtime to your cable subscription)
It was always the women, and above all the young ones, who were the most bigoted adherents of the Party, the swallowers of slogans, the amateur spies and nosers−out of unorthodoxy
Kate wrote: Yes, let's make students pay more in interest while protecting billionaires from any increased taxes. Makes logical mathematical sense.
Let's raise the amount of money the Medicare Taxes raise and spend that money on something other than Medicare - you're good with that Kate? You are good with breaking a trust with the union's citizens that those funds would be used solely to pay for those programs that the "progressives" made when they created those programs and levied those taxes to pay for them?
Oh wait, that's right. It's a lie that these are specific taxes for specific programs, and always has been despite all the protestations to the contrary - it would have been unconstitutional if it had been set up that way. These payroll taxes are not in any way different from any other taxes levied by acts of Congress, the revenue from those taxes is not in any way different from the revenue raised by the other taxes and the appropriation of that revenue is not any different from any other appropriation of tax revenues by Congress. All of that was part of the Supreme Court decision that failed to overturn the Social Security Act as being unconstitutional.
I'm not really interested in protecting billionaires ----
What I'm talking about is extending a billion plus dollars in benefits to people who don't really need them.
The cost being "imposed" on students is reasonable. They're borrowing (non-secured) money at a reasonable interest rates. Banks could not break even, let alone make money at the current rates.
What we're talking about here is a billion plus dollar political stunt - designed in large part to secure the student vote.
The savings to your average borrower are hardly material.
The real increase in the cost of student loans has been the rapidly escalating cost of a college education. The difference between 6.8% and 3.4% on a loan is peanuts compared to the increasing cost of tuition and room and board.
When are the Dems going to ask the taxpayers to subsidize that as well? Or is this just an election year ploy to tackle an insignificant part of the problem while the elephant is still standing in the room making big messes?