Thursday, October 27, 2011

Obama's Student Loan Giveaway...Is Not Even Much Of A Giveaway

The Atlantic does the math, and says:

For the average borrower, the impact would be small. In 2011, Bachelor's degree recipients graduating with debt had an average balance of $27,204, according to an analysis done byfinaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.
Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn't going to save the economy. While borrowers with bigger balances would save more, this is the average. And even someone with $100,000 in loans would only cut their monthly payments by $28.50.
Even the accelerated loan forgiveness--allowing forgiveness of the loans after 20 years, instead of 25--has an additional poison pill in it, at least according to this comment:
The only nasty little secret that people forget to mention about the loan forgiveness with IBR or ICR is that, at least with the 25-year (soon to be 20-year) forgiveness, is that you must report cancellation of indebtedness income (CODI) on your taxes the year the debt is forgiven. Thus, if you have $100,000 of debt forgiven, you must recognize income of $100,000. 

2 comments:

asdf said...

And that doesn't even take into account the fact that a college education just isn't worth much anymore.

Clayton said...

It depends what your degree is in. Some degrees are still economically valuable--and I like to think my students learn something at least useful for being good citizens!