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Obama’s Student Loan Scam

After President Obama’s recent budget proposal, many students expressed satisfaction with his efforts to solve the problem of skyrocketing tuition at American universities, and mounting student loans. So what exactly are they happy about? What does Obama’s budget proposal actually do about the increasing financial strain on students?

Well… as with most of this president’s ideas (the stimulus, Iran, the list goes on and on), he completely disregards the root of the problem, all while displaying spectacular disregard for the actual well-being of youth.

Obama’s proposal is to cut the federal funding to universities who raise (or in some cases refuse to lower) their tuition; increase the maximum Pell grant to $5,635; delay an increase in the 3.4 percent interest rate for Stafford loans, a subsidized student loan; and increase the Perkins Loan program from $1 to $8 billion.

So what does all this “help” mean for the average student? If you answered, lots more debt – then ding ding ding! That’s right, kids!

See, what the Obama administration fails to acknowledge – maybe they don’t even understand it – is that providing “incentives” for universities to lower tuition means nothing when you’re increasing the amount given out in loans.

University tuition (especially at private schools) continues to be artificially driven up because of the massive amounts of money given by the federal government in the form of student loans – which, by the way, have an outrageously high default rate and no forgiveness. This isn’t a bad deal for the government, which can garnish wages and even withhold social security from cosigners of defaulted student loans. And it works out okay for the universities, because those dollars flow directly to their institutions, allowing them to compete for overpaid professors and overpriced building projects. But how is this good for students?

Even Joe Biden, not exactly known for being a free market advocate, recognizes this problem. In a speech at Florida State University, Biden was asked about outrageous tuition costs and how the government continues to give out loans that drive them up. He responded, “Government subsidies have impacted upon rising tuition costs. It’s a conundrum here. But if we went the way of your view of the free market route, what we would have done is we would not have done that…We would not have increased Pell grants, for example.”

Biden’s statement implies that the Obama Administration actually is aware that it’s sabotaging America’s youth by increasing student loans – instead of cutting them and forcing universities to decrease their tuition costs. Of course, it’s “all for the children,” right? Or the higher education version of that bromide, which is “helping more people go to college.”

This justification is no different than much of what got us into the current economic situation – the sub-prime mortgage crisis. The government, after all, is the entity that forced banks to give homeowner loans and mortgages, under policies such as the Community Reinvestment Act of 1977, to families they knew would default. The home-buying version of the higher-ed bromide is, “everyone deserves to own a home.”

If President Obama really wanted to help college students, he would allow the free market to function. However, it has never been clearer that our president does not believe in the free market. (See healthcare, energy, education spending, etc.) He believes in the power of the state. And students who buy into his Santa Claus philosophy of magical tuition money that comes from Big Brother – are only digging their own financial grave.

Fix Contributor Emily Schrader graduated from the University of Southern California in December.

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