Obama Broke Student Loan Program Too

"Obama keeps trying to portray the student loan crisis as a problem suffered by students burdened by a mountain of debt when they graduate," writes Investor's Business Daily. But the greater crisis, the editors' argue, is the explosion of debt owed the federal Treasury as a result of Obama's federal takeover of the loan program.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn't happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program's costs by $27 billion, or 30%.

IBD's chart (above) shows the rapid explosion in student loan debt owed to the federal Treasury, which totals nearly $1.2 trillion today and "now exceeds that of auto loans or credit card debt."

Although "average student loan debt is only a little over $20,000" (an amount IBD editors argue could be paid back within a decade by "a student who gave up his $5-a-day Starbucks habit"), less than half of student debt owed the federal government is being paid back.

Through words and actions, Obama has encouraged irresponsibility on the part of student borrowers. He constantly talks as if student debt were an unfair burden they unknowingly had foisted upon them.

At the same time, he's made it easier and easier to avoid paying back student loans in full.  Earlier this year, for example, Obama expanded eligibility for his "pay as your earn" program, which limits loan payments to 10% of income, with any debt left after 20 years forgiven.

Students got the message. The St. Louis Fed reports that 27.3% of student loans in repayment are at least a month behind in payments. That's a far higher delinquency rate than any other kind of debt, and it's significantly higher than the delinquency rate 10 years ago. ...

A 2013 Consumer Financial Protection Board report found that less than half of this federal loan money was actually being paid. About 30% was held by borrowers still in school or in a grace period, another chunk in deferment or forbearance, and almost 14% was in default.