Will Obama Forgive Student Loans by Executive Order?

In President Obama's State of the Union address, he mentioned plans to make higher education available for everyone.

Obama said, "We're offering millions the opportunity to cap their monthly student loan payments to ten percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt."

Obama didn't provide details on how he plans to do this, but he has talked about student loan forgiveness in the past.

Students not awarded with full scholarships turn to student loans. And now, those borrowers are defaulting at an alarming rate.

National student-loan debt surpassed the $1 trillion mark, rising by $33 billion in the third quarter of 2013, according to a November report released by the Federal Reserve Bank of New York.

According to Seth Mason (referencing an Institute for Higher Learning report), Nearly half (41%) of student loan holders have been behind on their payments over the last 5 years, and, last year, a full 12% of borrowers were in outright default on their student loans. At the current rate of growth, the student loan default rate will eclipse the historic maximum default rate for home loans, 14%, by mid-2015.

Despite our seemingly non-stop economic "recovery" efforts, the student loan default rate has grown steadily since the 2009 economic bottom, surpassing even credit card debt.


Despite the default rate, the government is making huge profits* off of cash-strapped students.

According to the Detroit Free Press:

The $41.3-billion profit for the 2013 fiscal year is down $3.6 billion from the previous year but still enough to pay for one year of tuition at the University of Michigan for 2,955,426 Michigan residents.

It's a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.

In 2010, Danny Schechter described student loans as a ticking time bomb of American debt. In 2014, the debt continues to grow.

"The danger here is that instead of capitalism we end up with serfdom, because these students are indebted for life," he said.

Economist Max Wolff said, "Students graduating are facing the worst job market in a generation at least. And so you have people with more debt than we have ever seen before, who are having a harder time finding any job, let alone a job that pays them enough to somehow pay off all this debt."

Despite some reforms like the income-based repayment (IBR) plan, which allows student borrowers to cap their monthly payments to 15% of their discretionary income, students still want relief (Beginning 7/1/2014 this will drop to 10% and all their debt forgiven after 20 years).

Last year, Sen. Elizabeth Warren (D-Mass.) said, "college graduates struggling to repay their student loans should have an easier time getting their debt eliminated if they go into bankruptcy" (Right now the law prohibits student loan bankruptcies). She also wanted to make student loan interest rates the same as the Federal Reserve discount rate, 0.75 percent. Her proposal failed.

Bypassing Congress and using executive orders to get things done was a reoccurring mantra in Obama's State of the Union address. Will Obama issue an executive order to forgive student loans completely, or will his plan look similar to Warren's proposal? Currently, the rhetoric from Obama's opposition are merely scare tactics. Big barks from GOP leaders with no bite. So it should be interesting to see what solutions Obama offers to "solve" the student loan fiasco.

President Obama wants college to be for everybody, but realistically, should this be the case? Is it better to graduate with an art history degree and $30k in debt or to skip college? With that much debt and limited job prospects, the parents' basement is really the only housing this person could afford. Students are discovering that a college degree is not the golden ticket to prosperity as promised by Big Education. A college degree may help, but the key to success in America is still hard work, determination and relentless persistence that will win in the end.

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