We had a brief discussion of the possible bailout/forgiveness of student loans several days ago, and here we are. Congressman Hanson Clarke (D-MI) has proposed H.R. 4170, the Student Loan Forgiveness Act of 2012. You can see from the chart above that the student loan delinquency rate spiked to a record 11% during the presidential campaign on speculation that Obama would be reelected. Inasmuch as that nightmare has occurred and an actual bailout bill has been proposed, it’s a pretty safe bet that the delinquency rate will will continue straight up.
America’s now-nationalized student loan industry just reached a value of $1 trillion, according to Citigroup, growing at a 20 percent-per-year pace. Since President Obama nationalized the industry (a tacked-on provision of the Obamacare bill), tuition has gone up 25 percent and the three-year default rate is at a record 13.4 percent.
With many young people unable to pay their loans (average graduating debt is about $29,000), Citigroup and others are speculating that this industry might be ripe for a bailout.
To pay off all the current defaults, Citigroup says it would cost taxpayers $74 billion. However, this number doesn’t include those who will default in the coming years, and, when the government rewards the defaulters, it will encourage more borrowers not to pay their debts.
And liberals in Congress have proposed forgiving all student loans via “The Student Loan Forgiveness Act 2012,” costing taxpayers $1 trillion.
Adding another $1 trillion dollars to the national debt isn’t exactly “forgiveness” for young people—it’s prolonging the payoff. In fact, student loan bailouts are a catch-22 for young people because they’re going to be held accountable for paying off the national debt and interest payments.
A student loan bailout will also be rewarding higher education bureaucrats for a diminished product. A college degree used to mean that a person would add on average $1 million to their income over their lifetime. Today a college degree only guarantees an average $300,000 in added income over a lifetime.
Continue reading here. HT – Breitbart