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Thursday, April 26, 2012

Are There No Limiting Principles? An Electoral Dilemma That Needs to Be Addressed


President Obama is telling his presumed constituents of college students that he is fighting for them against the evil republicans. They want to raise the student loan rate back to 6.8 percent (already a bargain) from its temporary low of 3.4 percent. Republican nominee Mitt Romney has already caved out of fear of giving Obama another campaign sound bite. Support for the 3.4 percent rate is already prominently featured on Obama’s campaign web site.

Government-backed student loans, let me tell you, will be our next financial catastrophe. The default rate is rising and banks (and the government as guarantor) will be again left with toxic assets. Government backing of student loans is already an enormous asset for college students. Banks would not otherwise lend to students based on the promise of higher future earnings. They should be happy to get the loans at 6.8 percent because scholarly studies place their lifetime annual rate of return from a college education between 8 and 13 percent. A college education is a ticket to the upper middle class.

The trap Republicans face is that Obama can promise to have the government pay for any meritorious good – green cars, condoms, books, laptops, free public transportation, virtually anything – and paint those who oppose as miserly ogres who do not want to help. Mitt Romney cannot cave in to every such “caring” gesture of candidate Obama.

How and where can we draw the line?

4 comments:

  1. Robert Reich (UC Berkeley Professor, the labor secretary in the Clinton administration): Student Loans Could Be the Next Housing Bubble.

    "U.S. college students borrowed $117 billion in federal student loans last year, and the Consumer Financial Protection Bureau reported earlier this year that debt from student loans exceeds $1 trillion, surpassing credit card debt for the first time."
    http://finance.yahoo.com/blogs/daily-ticker/student-loans-could-next-housing-bubble-robert-reich-144742652.html

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  2. The 3.4 percent student loan rate is well below what it was (6%+) before, and well below the market rate without distortion. 'Nominally', this has generated $1+ trillion of student loans. If we include other loans for the same purpose (second mortgage, credit card loans used by the students, etc), then the 'real' level of student loans will be much higher than the nominal amount. So, Michael Lewis's "The Big Short: Inside the Doomsday Machine," may have a sequel.

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  3. Who can apply for a federal backed student loan? In what age will a person be eligible to apply for a student loan? Questions that I would like to clear out before applying for a student loan.

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  4. Fellowship will be the launching pad to the rest of your career, and as such, fellowship personal statements should focus on the future as opposed to what you have already accomplished.

    ReplyDelete