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Senior Advisor

student loans

Gives colleges the opportunity to grab tax dollars hand over fist. Throw another IOU in the social security lockbox.

 

snip-

Debt: Having spent years chastising bankers for making risky loans, President Obama is now responsible for a $22 billion shortfall in the student loan program. Guess it's not risky to gamble with other people's money.

Politico has uncovered what it rightly calls a bombshell hidden in the fiscal 2016 budget that Obama proposed on Monday: The federal student loan program "had a $21.8 billion shortfall last year, apparently the largest ever recorded for any government credit program."

That, Politico's Michael Grunwald notes, is bigger than the entire budget for NASA, the Interior Department and the EPA.

Obama can't blame President Bush for this one, since it's a direct result of his determination to have the government take over the student loan business.

Early in his first term, Obama complained that "we have a student loan system where we're giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans." So he set out to eliminate a 40-year-old program that provided guarantees to lenders so they could make high-risk tuition loans at relatively low rates. And he succeeded in 2010.

As a result, the federal Direct Loan Program, created under President Clinton as a "public option" to private lenders, is now the only game in town. Not surprisingly, between 2009 and 2011, the number of these government student loans shot up 62%.

Today, the Education Department has an eye-popping $740 billion in outstanding loans, making it the government's second biggest lender after the Federal Housing Administration.

To make matters worse, Obama started making it easier to repay the loans — or more appropriately, not repay them. In 2011, he announced a "pay as you earn" program that lets borrowers set monthly loan payments at no more than 10% of their discretionary income. And after 20 years, the government eats whatever's left.

That's what's behind the current shortfall, which threatens to get much bigger if the program isn't reined in. Barclays Capital warns that the program could wind up $250 billion in the hole over the next decade.

"Behind closed doors," Grunwald reports, "officials in the White House budget office and the Treasury Department have criticized the Education Department's loan models as overly optimistic, with some officials pushing internally for third-party audits."

And what are taxpayers getting in return for unwittingly taking on all this risk? Despite the massive increase in federal aid, Obama hasn't made college less expensive.

The average tuition — net of all the government grants and subsidies — was $3,000, up from $2,100 in 2010, according to the College Board. Net tuition at private colleges climbed over those years as well.

Colleges apparently took all these generous new subsidies and raised their fees, leaving the prices paid out of pocket by families and students relatively constant.



Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials/020515-738158-student-loan-program-faces-a-massive-funding-...

30 Replies
Honored Advisor

Re: student loans

Well 3020, the government can make prices lower when they want to, look at the price of food.  Perhaps the government eggheads that write the farm bills should also write the rest of the programs....shoot, a semester at the University of Minnesota would be down to $300, just like when Walter Mondale attended  Smiley Happy   Universities would have to choose between "PLC" or "ARC".

Veteran Advisor

Re: student loans

Sounds about the same as what happened to the farm corn dryer price once the US govt started subsidizing new ones with 25% grants.

Senior Advisor

Re: student loans

Well BA and Red, I would say most college professors are in the top 1%. Maybe even in the top .01%. And the ones who are responsible for guaranteeing these loans are the middle class who depend on their saving for retirement. Now these type of government programs keep interest artificially low so their life time of earning yield next to nothing after they are no longer able to work. So what we once again have is the hard working middle class subsidising the top 1% thanks to progressive Almighty Big Government policies designed by the rich for the rich. And yes, pointing that out makes me a racist.

Senior Contributor

Re: student loans

There's too many numbers....they won't understand.  Besides all they care about is getting the Gruber award.

Advisor

1%? ,01?

You have a handle on that about as well as BA does the various events of world and American history.  But at least his fecal stuff is only opinion geared up from semi relevant facts.  Yours is just simply contrived lies.

 

http://www.washingtonpost.com/blogs/on-leadership/wp/2014/04/07/heres-what-the-average-full-time-pro...

Senior Advisor

Re: 1%? ,01?


@bruce MN wrote:

You have a handle on that about as well as BA does the various events of world and American history.  But at least his fecal stuff is only opinion geared up from semi relevant facts.  Yours is just simply contrived lies.

 

http://www.washingtonpost.com/blogs/on-leadership/wp/2014/04/07/heres-what-the-average-full-time-pro...


Wow. Thanks for the link Bruce.

 

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Presidents of public doctoral institutions, meanwhile, saw their salaries rise 11.3 percent on average over the past seven years. And presidents at top private universities saw even higher average raises: 17.3 percent over the same period, compared to 7.2 percent for professors at the same schools. (Private schools tend to pay their faculty more.) Pay for senior administrators, such as chief academic officers or chief financial officers, saw increases similar in scale to their presidents, or even higher, at both public and private doctoral institutions.

Saranna Thornton, a professor of economics and business at Hampden-Sydney College and the chair of AAUP's Committee on the Economic Status of the Profession, says that no one expects faculty and presidents to get paid the same amount. Even if the salary growth rate were the same, she explains, there's an understanding that the two pay scales would deviate over time. "But even accounting for that divergence," she says, "we're still seeing, particularly in past decades, presidential salaries skyrocketing."

Senior Contributor

Re: 1%? ,01?

My Wife and I run into this same attitude and mistake from people that think they are informed and in reality are not.

 

My Wife has been a teacher for 25 years or so. People will say "wow, you must be raking it in" she will reply, "not really". Then they will say " well we saw that you teachers have a salary of over $100,000/year".  My Wife will politely say "no, that is what the Superintendent of the School District makes". 

 

My Wife makes about half of what they think, but you add the $12,000/yr in benifits and its not so bad. She could make more in the business world, but she really likes working with kids.  

Advisor

Re: 1%? ,01?

Looked back and you said professors.  Nothing about administrators,  THAT WOULD be in keeping wih the tendency in the corporate world. But that wasn't your contention. High administration increasingly soaring compared by ratio to "the help", which in this case would be the instructors..

 

And FWIW, the compensation of much of the faculty in primarily privates is skewed.  Indepedent contracting hs hit that field hard.  No bennies. no tenure and I'm quite certain not reported in this salary calculations, which if they were would make the numbers some lower.

Veteran Advisor

Re: 1%? ,01?

Bruce, I think he is assuming that everyone in a college gets paid like the football coach! LOL