As the default rate rises on federally backed student loans, President Obama has responded with a plan to make education lending even more expensive for taxpayers. That’s hard to do, but he’s determined.
In his first student-lending reform, which was rushed through the Senate as part of ObamaCare, Mr. Obama added $1 trillion to the federal balance sheet over the next decade by eliminating private lenders. Stage two, which he offered recently at the Denver campus of the University of Colorado, added easier repayment terms and debt forgiveness. Who says Uncle Sam is a scrooge?
Specifically, Mr. Obama wants to accelerate an "income-based repayment" option to forgive more student debt and limit monthly repayments for graduates earning low salaries. Thanks to the 2010 law, this change is already scheduled to take effect in 2014. But in Denver he said, "I’m here to announce that we’re going to speed things up. We’re going to make these changes work for students who are in college right now. We’re going to put them into effect not three years from now, not two years from now—we’re going to put them into effect next year."
It’s good to be the King — even if it’s not legal. The 2010 law clearly states that the new repayment option is "for new borrowers on and after July 1, 2014." GOP sources in the House and Senate tell us that the Administration can probably make these changes using the authority in a related program, but they doubt that the President can put them into effect next year.
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