Obama Student Loan Program: Here’s How it Works for Susie Creamcheese

Obama’s student loan program is the news of the day as Occupy Wall Street demands free education. They will come close to getting it with Obama’s new ‘work-around Congress,’ a virtual opportunity to thumb his nose at the August Senatorial body, who approved the legislation to let him do so. Here is a great explanation of how his program works.

Obama's Long Shadow over America

Fox News:

If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.
Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.

Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy.

The president will also allow student debtors to refinance and consolidate loans on more favorable terms, further decreasing the payoff for taxpayers.

The rest of the story from Fox:

Obama is now seeking to use that new power to obtain a taxpayer-financed stimulus that Congress won’t approve.The idea is to cap student loan repayment rates at 10 percent of a debtor’s income that goes above the poverty line, and then limiting the life of a loan to 20 years.

How does Obama get around Congress?

The best part for Obama is that he can obligate the Treasury without Congressional approval thanks to the passage of what he described as a cost-saving measure in 2009…

That legislation, passed in the Senate as a rider on the president’s health law in order to use the reconciliation process that requires 50 votes instead of the usual 60 votes due to bipartisan opposition, was promised to reduce federal outlays by $68 billion over the next decade, monies which were earmarked for cost savings and an expansion of the Pell Grant program for needy college students. The funds for the stimulus endeavor announced by the president in Denver on Wednesday are said to be drawn from that cache.

Hot Air’s Ed Morrissey has a fascinating story about the $8 extra, per month, a student will have in his/her pocket, thanks to Obama.

Obama’s biggest change will, on average, put $8 in the pockets of student-loan debtors.  In contrast, Obama’s Making Work Pay tax cut added about $8 per week to the paychecks of all workers in the US for more than two and a half years.  Did this lead to an economic renaissance?  Not exactly.

But think of the newly created, educated voters Obama will gain due to his benevolence with everyone else’s money.

Posted by Maggie @ Maggie’s Notebook

  • Sandy

    Hi, Maggie, the talk shows have picked up your column and something from Fox, that says someone could borrow $212K from the federal government student loan program. The borrowing limits are here: http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp The max a student can borrow from the fed student loan program is $31K for average undergraduates. A lot of parents probably wondered hearing this story today, cuz we wish our kids could borrow the whole thing, but the federal student aid program expects Normal parents to pay, and then after that you are referred to the private student loans, which you co sign for, for your student, or private loans for yourself…or whatever you like.

  • Courtney

    There are so many sad issues with this. First you are assuming that Susie speaks fluent Spanish, otherwise her chances of landing a job in social services are few and far between. Then you are assuming that Susie isn’t married, in which case they would add her husbands salary on top and then she wouldn’t qualify for an income contingent plan… well unless they multiply like rabbits. Then you are assuming that Susie never gets a raise which with the unrealistically low thresh hold for being above that amount Susie would surely surpass the income limit in her career.

    The truth is that I just found your site after making a student loan payment. I have about $57 k in student loan debt and I am currently paying $280.00 per month for that amount on a graduated plan. ALL and I mean everything, 100% of my payment bypasses any impact to my principal payment and applies to interest on my loan… do you know how discouraging it is to make payments monthly and see the “outstanding” balance increase because interest is being applied daily and nothing is going to interest?

    Obamas efforts are like all of his efforts, simple propaganda and nothing more, the government can keep their $8.00 a month, they can keep their lies they told to get me to re-finance my whole loan with direct loans and if I can get a job in another country they can soon also keep my citizenship because I don’t believe in paying the level of taxes that I pay to support a country that doesn’t at all support me but rather applies a $300.00 tax to my student loan debt to pay for a health care reform bill that will never benefit me. Students aren’t sour about this because we want free loans, we are sour about this because we want fair loans, we want the same consumer protections as any other loans and that is where Obama should have directed this “change”.