The Obama Struggle With Student Loans
President Obama has been campaigning around the country this week (or as he puts it, going on official, taxpayer-funded business trips) to talk about his plan to have taxpayers continue to subsidize student loans. When he does this, he claims that he and Michelle know what it's like to struggle with student loans and that they only paid off their loans eight years ago.
Jonathan Karl at ABC News was curious about what their income was like during these years of struggle before paying off student loans.
But according to their tax returns, which are available on the White House website, the Obamas had a healthy, six-figure income by the year 2000 (the earliest return available). And for at least two years before his loans were paid off, Obama, by his own definition, made so much they were wealthy enough to pay higher taxes.
Here's a rundown of the president's income, according to his tax returns, in the years before he paid off his student loans:
2004: $207,647
2003: $238,327
2002: $259,394
2001: $272,759
2000: $240,505
In 2001 and 2002, the Obamas would have met the $250,000 standard the president has set for those wealthy enough to afford to pay more taxes.
It's also notable that the Obamas didn't claim deductions for student loans on any of those years, most likely because they made too much money to qualify for the student loan deduction.
Yes, I'm sure that was quite a struggle to repay student loans on a nice six-figure salary. I mean, I'm not even saying it was a walk in the park but that the Obamas might be a bit out of touch with what an actual economic struggle is.
And beyond all this, I have to say that this student loan subsidy -- and our "conservative" Mitt Romney is backing it, too -- really chaps my hide.
I chose a less expensive college than some of the ones I got into and I worked full-time to put myself through school without any debt.
Please tell me more about how Obama and Romney want me to subsidize those who made different choices.
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Nov '10
Re: The Obama Struggle With Student Loans
Trace Urdan
Lucy Pevensie
Trace Urdan
Trace, you're missing Ecdysis's point, which is that government guarantees of loans give people the ability to borrow more money than really makes sense for the educational programs they are taking on. How does it make sense for someone to borrow $13K to pay for training that will let you earn $14/hr before taxes?
Lucy -- The government doesn't guarantee the money (those were the old days;) it lends the money directly. And you're right that many students make poor choices which they regret when they have to repay the loans, but that is hardly the fault of the government.
Except that the government makes it possible for these places to charge extravagant tuition, and distorts the market (as ecdysis points out). The student is left without a lot of good choices. If there were no market distortions in the first place, and employers needed (for example) medical assistants, the market would figure out a way to supply such people without enriching the academic intermediaries.
May '10
Re: The Obama Struggle With Student Loans
Lucy Pevensie
How does it make sense for someone to borrow $13K to pay for training that will let you earn $14/hr before taxes?
It makes perfect sense when the alternative is minimum wage, welfare, or worse. $13K (which overstates the amount borrowed because most students in those programs qualify for full or partial Pell,) translates to $150/month over a 10 year repayment at the regular 6.8% interest rate. At the current reduced 3.4% rate it translates into $130/month. Assuming some state tax, that level of income translates into $2000/month in take-home pay. That loan burden is not insignificant but the opportunity to work as a medical assistant or in medical billing and coding in a professional setting with benefits is life-changing.
So yes there are many things that could be made better in our higher education system, but the government loaning money to students is not the source of the problem and eliminating the loan program would cut off opportunity for vast numbers that are most in need of a path to better themselves.
Nov '10
Re: The Obama Struggle With Student Loans
Trace Urdan
Lucy Pevensie
Trace Urdan
Again -- the fact that student make poor choices is not the fault of the lender.
I disagree completely. In a free-market system, lenders won't make loans that are a bad choice for the recipient, because if the recipient can't pay the money back, it's also a bad choice for the lender. Government involvement, whether by guarantees, direct participation, or subsizing loans, just distorts the market such that people are more likely to make bad loans. And adding more regulation isn't the answer; quitting meddling in the market for loans is.
Nov '10
Re: The Obama Struggle With Student Loans
Trace Urdan
It makes perfect sense when the alternative is minimum wage, welfare, or worse. $13K (which overstates the amount borrowed because most students in those programs qualify for full or partial Pell,) translates to $150/month over a 10 year repayment at the regular 6.8% interest rate. At the current reduced 3.4% rate it translates into $130/month. Assuming some state tax, that level of income translates into $2000/month in take-home pay. That loan burden is not insignificant but the opportunity to work as a medical assistant or in medical billing and coding in a professional setting with benefits is life-changing.
If there weren't the government loans, there might be high schools that would offer the same credential. Heck, there might be a way to study for it on your own, pass an exam, and get the same credential. Look at Khan Academy and all the other free academic resources there are out there.
I'm very enthusiastic about opportunities, and I think student loan debt is a dreadful way to finance them.
May '10
Re: The Obama Struggle With Student Loans
Lucy Pevensie
If there weren't the government loans, there might be high schools that would offer the same credential. Heck, there might be a way to study for it on your own, pass an exam, and get the same credential. Look at Khan Academy and all the other free academic resources there are out there.
I'm very enthusiastic about opportunities, and I think student loan debt is a dreadful way to finance them. · 13 minutes ago
You mean government-funded high-schools? The truth is that higher education results in a tangible benefit to the student that also happens to benefit society. So society as a whole has an interest in seeing more people get more education. In the European model and the state college model, the government pays. But this model is failing. Other pressures on tax revenues are crowding out education. The student loan system has the advantage of holding individuals accountable for the cost of the education that benefits them directly. The private loan market would not fund individuals that have no/poor credit which would significantly narrow their opportunity set. In Libertarian utopia it would be unnecessary. But I live in the real world.
May '10
Re: The Obama Struggle With Student Loans
Lucy Pevensie
Look at Khan Academy and all the other free academic resources there are out there.
I'm very enthusiastic about opportunities, and I think student loan debt is a dreadful way to finance them. · 27 minutes ago
Khan Academy is cool. But it actually only works as a supplement to kids that are already strong students. As a tool to teach concepts to kids that are struggling, it fails completely.
There are a host of entrepreneurial companies that are fostering alternative models and approaches and that is all good. Post-secondary education means just that -- everything from job training to PhDs.
But someone has to pay. And the two choices are the consumer or the government. I'm all for tinkering with the program, and for introducing more market forces to place pressure on schools to bring down costs, but blowing up the student loan program would have a deleterious near-term effect.
Nov '10
Re: The Obama Struggle With Student Loans
Well, sure, blowing up student loans would have a deleterious near-term effect. That's what happens when the government screws things up: they get screwed up. But there's also an immediate deleterious effect to continuing our current student loan programs for the young people who sign up for these loans, and adding massive regulation to the student loan program is only going to drive the cost of tuition up even further.
Trace, let's take a step backward. We're already paying for public high schools. Where is it written that people can't get decent vocational training in public high schools? Why should anyone have to spend $13K to learn to be a medical assistant? What did people do before there were Medical Assistant training programs? (Answer: people graduated from high school literate, and then got jobs where they learned the necessary skills on the job, if their vocational education curriculum hadn't prepared them adequately.)
The best way to unwind this is to get the government out of the business of requiring certification programs for everything. Let people get credentialed by exam, and then let people learn what they need to know any way they can.
Nov '10
Re: The Obama Struggle With Student Loans
Trace Urdan
Lucy Pevensie
Look at Khan Academy and all the other free academic resources there are out there.
I'm very enthusiastic about opportunities, and I think student loan debt is a dreadful way to finance them.
. . .
But someone has to pay. And the two choices are the consumer or the government. I'm all for tinkering with the program, and for introducing more market forces to place pressure on schools to bring down costs, but blowing up the student loan program would have a deleterious near-term effect.
Well, the government can pay in the form of paying for secondary education, which the government is paying for already. And there's at least one additional option which is that employers can pay. For the most part they're not going to pay $13K to train someone to be a medical assistant, which is a way of pointing out that $13K is a ridiculous amount of money to charge for the training of a medical assistant.
Nov '10
Re: The Obama Struggle With Student Loans
Lucy Pevensie
R. Craigen: My parents were dirt poor. There was no way they could pay a dime toward university for me, and I didn't expect them to. . . .
I realise with tuition nowadays it's not so easy, esp. if your heart is set on an Ivy-League school. Even so, what's wrong with kids today?
Actually, at least the way the system works in the US, having dirt-poor parents is an advantage. Since most of the scholarship money these days is need-based, a person from a truly poor family will have a better chance of graduating with little or no debt than a person from a middle-class family.
Yes, I get that. I taught at a small US university for 4 years and saw this in action. I'm not in favour of "need-based scholarships". And my anecdote was about avoiding assistance, not leveraging poverty to arrogate it. I think an ideal system would charge students a reasonable portion (say 50-60%) of the actual cost of their education (averaged) and give some of it back through generous grade-based rebate scholarships. 100% for 4.5 GPA, 0% for 2.0 GPA, prorated.