As Act I of the Bread and Circuses for votes extravaganza, as Democrats vie for primary spots and then on to the general election: Let's forgive all the student loans!
The Detroit Free Press: It's time to forgive student loans, U.S. Rep. Hansen Clarke says
President Barack Obama signed a law Friday extending a cap on federal Stafford student loan interest rates -- but U.S. Rep. Hansen Clarke, a Detroit Democrat, argues it doesn't go far enough.
He's hoping the more than 1 million people who have signed a petition supporting a bill he's championing will force Congress to make more meaningful reforms to the student loan system.
"The demand is to change the system," he said June 25. "We've got to keep the bubble from bursting and help people who are swamped by debt. I would like to forgive a lot of these loans."
Clarke's bill, which is in committee in the House, would do just that.
Under his plan, people could have federal loans forgiven if they paid 10% of their disposable income -- which is basically any income exceeding 150% of the federally set poverty level -- for 10 years. The plan would apply to undergraduate, graduate and parent loans. Those in public service jobs could have loans forgiven after five years.
So the government created a program of student loans. This led a continual rise in tuition beyond inflation causing students (who lean Democrat, natch) to incur massive student loan debt as they had to get these loans to keep with the tuition increases that were always backed by the increased government loans that would cover the tuition increases.
Voila, One government created bubble, and to prevent it from bursting he's going to make it bigger. What could possibly go wrong?
Indeed, how is his proposal to forgive those loans to be funded? - With what money exactly?
Don't ask, it's election season after all, and he's trying to win a primary here.
Of course his proposal won't create a moral hazard from giving free money to people after they've to taken on unsustainable loans for unemployable majors?
"Nobody's getting a free ride here," he said. "They have to pay on the loan before they are eligible for forgiveness."
Well Democrats don't believe in the concept moral hazard anyhow. But, he's kidding right? How exactly is having 10-15 years worth of loan debt written off in return for paying only 5-10 not a free ride?
I also love his "public service" booster.
Look, public service jobs, with the exception of law enforcement, tend to draw Democrats like flies to honey.
For one thing, its about the only job they can often get with their sociology and basket-weaving studies majors.
For another thing, its a job. It pays money, often more than a private sector job of comparable worth. To claim that a public service job is a hair-shirt nobly worn that entitles one to more taxpayer debt forgiveness than a private sector job holder -- with the public service job holder's salary and debt forgiveness to be ultimately paid by the private sector -- just doesn't wash.
Clarke's bill would keep the interest rate at 3.4% for federal loans indefinitely. The version signed by Obama keeps the cap, which expired July 1, for only the next year.
So regardless of what the market does with interest rates, students will only pay 3.4% on a unsecured loan? Should interest rates jump, the feds will be losing even more money hand over first. Clarke's proposal keeps student loan debt in an academic world detached from reality, much like the debtors themselves as they go through college.
Then again, why should these Dem politicians care, they'll likely just print up a trillion dollars and wipe out student loans that way. After all, the proposal doesn't rationally explain how this largesse is going to be funded.
Bread, Circuses, and Goodies for Democrat and interest groups voters.