Obama’s student debt plan – does it actually help anyone?

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I know the full details aren’t ironed out just yet, but from the information I have so far (from the NY Times and the official government site), the program doesn’t actually do much to help anyone.  It’s a limited-availability consolidation program that excludes private loans (surprise!), and an option to pay 10% of your discretionary income for 20 years with the remainder unpaid at that time being forgiven.

Great.  Notwithstanding the fact that in 20 years most people with average salaries on IBR programs have repaid their loans in full anyway, it’s pointless to offer programs with what I considered “deferred” payoffs to people who are struggling right now.  Grads don’t need loans forgiven in 20 years.  They need some of their loans forgiven right now.  And the consolidation program is so toothless that it’s barely worth addressing.

While I appreciate that since this is Obama acting unilaterally, his powers might be very limited and his hands are somewhat tied.  What I fear is that the Obama administration will now consider the student debt crisis “solved”, and move on to other issues.  And if that is the case, those struggling under piles of student debt have just been screwed.

Obama’s plan will help those who are truly struggling, but to be honest, that’s not most of us.  Most of us aren’t deciding whether to pay buy food or pay student loans.  But there are huge numbers of graduates who are burdened significantly enough that they are unable to live normal lives; they can’t afford to start families, they can’t afford to move to more expensive cities to take a better jobs, they can’t buy houses (or even move out of their parents’ houses), they have no healthcare and aren’t saving a penny for retirement, they can’t buy anything that helps the rest of the economy recover etc.  They’re shut out of typical American lives after doing what everyone said was the right thing to do: go to college and take on “good” education debt to do so.

The most depressing part of the NYT article is that the Obama administration doesn’t even seem to recognize the problem:

Ms. Barnes [Director of the Domestic Policy Council, speaking at a White House press briefing] noted that over the last month, more than 30,000 people had signed a petition on the We the People platform at whitehouse.gov, asking for relief on student debt.

“It’s a message heard loud and clear,” she said.

But it wasn’t heard loud and clear.  I bet almost every single one of those individuals who signed the petition asked for real debt relief right now.  And instead of offering that, they received a minor alteration to an existing plan that doesn’t help anyone other than those at the absolute extremes of hardship.

Part of me wants to believe that this is just a preliminary step towards addressing the student debt issue on a grander scale later on.  But to be honest, I’m inclined to think that we’ve all just been tossed a half-assed solution and the administration is thinking, “That’ll shut them up and keep them happy until after the next election.  Now, what’s the next group of voters we can give a cheap handout to?”


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