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?
