Obama Proposal Subsidizes The Rich....Again.

[franklin]

Maybe we're discussing things using different terms. Subsidized Stafford student loans are indeed needs-based, there are also unsubsidized Stafford loans, as well as private loans. I was unclear from the link in the original post if private loans were covered under the IBR provisions.

I found what you are claiming. Thanks.

My question would be whether, in any of the presented scenarios, if you had the choice between paying outright for college, or the choice of borrowing for college and investing that money in some reasonable insturment, borrowing money for the college education and investing the cash was a better return? If that were true, I would certainly regard the new IBR as overly favoring the wealthy. If not, then what's it's favoring is not the those born into wealth, but those who have acquired wealth, aka the successful who have moved up in income level. I have less of a problem with them getting a better deal.

The issue with this program is it encourages graduate students to go into unlimited amount of debt over a certain threashold ($40,000) because the more they borrow the more will be forgiven without the studen incurring any additional risk or repayment premium. There are several hazzards to this, with the most detrimental IMO is each school's ability to sell this to prospective students as a way to justify their tuition raises--the student won't feel the effect at all. This encourages the highest amount of debt a student can take on. Also, why would a private company care about the additional increments when the government guarantees to take the tab & when the student is capped on what they are paying anyway so the additional loan amount won't hurt their ability to repay? Not only is it a subsidy for high end degree earners but potentially for Wall Street lenders as well.

As far as giving help now and asking them to pay higher later when they can afford to, I agree. However, this is not the case. In the future, we will be forgiving massive amounts of student debt at the same time we are asking for higher taxes. It's the same thing as asking for higher taxes on the rich now but refusing to means test ss and medicare. Why give a subsidy and then take it right back? It's easier and less corrupt to simply not give it in the first place.

 

[franklin]

FWIW, my preference would be to subsidize the schools so tuition is dragged down rather than grow debt loads that students take on. It makes no sense to me to straddle anyone rich or poor with high loads of debt they can never get out from under. Also increasing welfare-to-work programs during the recent recession would have given a lot of workers from devastated industries some hope for a bright future.

Also, if we are subsidizing rates then lets make the damn loans ourselves instead of using a banking intermediary. We can set up a funny money fund that is designed to make a very low return so that it a) guarantees solvency and b) makes those who benefit give back a bit so the program can be expanded.

 

[TheSilencer1313]

FWIW, my preference would be to subsidize the schools so tuition is dragged down rather than grow debt loads that students take on. It makes no sense to me to straddle anyone rich or poor with high loads of debt they can never get out from under. Also increasing welfare-to-work programs during the recent recession would have given a lot of workers from devastated industries some hope for a bright future.

Also, if we are subsidizing rates then lets make the damn loans ourselves instead of using a banking intermediary. We can set up a funny money fund that is designed to make a very low return so that it a) guarantees solvency and b) makes those who benefit give back a bit so the program can be expanded.

I like the idea of increasing any kind of welfare-to-work programs, regardless of recession/depression.

I do wish some would take your second paragraph and superimpose this thinking as to the way our government prints it's money.
Just imagine the treasury printing it's own cash without interest attached.

 

[franklin]

I like the idea of increasing any kind of welfare-to-work programs, regardless of recession/depression.

Agreed. However, countercyclical measures are important.

I do wish some would take your second paragraph and superimpose this thinking as to the way our government prints it's money.
Just imagine the treasury printing it's own cash without interest attached.

We do. I can't figure why you avoid realizing this.

You seem to have an undue trust for congress printing whatever they want. Is there a reason you believe they are trustworthy, and without checks and balances?