How about a bailout for student debtors?

If the U.S. can come to the assistance of banks and homeowners, surely it could offer a helping hand in the form of lower interest rates for students.

Like many recent college grads, Los Angeles resident Steven Lee finds himself unemployed in one of the roughest job markets in decades and saddled with a big pile of debt. He owes about $84,000 in student loans for undergrad and grad-school costs.

But what Lee's angry about isn't the slings and arrows of an outrageous economy, and it isn't the idea that he owes a ton of money for all the learning he's received.

It's the interest rates on his government-backed student loans, which range from 6.8% to a whopping 8.5%.

"That's just ridiculous," Lee, 35, told me. "The rate for a 30-year mortgage is around 5%. Why should anyone have to pay 8.5%?"
Well, because a deal's a deal, and that's the rate Lee accepted when he received his loan.

"I disagree," he replied. "The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?"

Good question -- and one that's especially germane as tuition continues to soar at both public and private universities. The University of California is looking to raise its tuition by 32% next year to more than $10,000.

"If I was a student, I'd be outraged too," said Tony Hollin, chief executive of Edamerica, the seventh-largest provider of student loans nationwide, with about $1.6 billion in loans originated last year. "This is an issue that more people need to be aware of."

Edamerica lent $30,000 to Lee so he could get a master's degree in clinical psychology from the Santa Barbara campus of Antioch University. This followed Lee's earning a bachelor's degree in sociology and psychology from UC Berkeley.

Hollin said he'd love to charge market rates for student loans. Problem is, all of Edamerica's loans, and most of those provided by other lenders, fall under the Department of Education's Federal Family Education Loan Program.

The program allows private lenders to offer loans to students at subsidized rates. It helped service financial aid at more than 4,400 schools as of February, according to the National Assn. of Student Financial Aid Administrators.

By contrast, about 1,600 schools used direct loans provided by the Department of Education.

"I wish we could help students," Hollin said. "But the rates we charge are mandated by the federal government. We can't change them."
So Lee has a point. If the feds can come to the assistance of beleaguered banks and homeowners, why can't they offer a helping hand in the form of lower rates for students?

"That's a question I often ask myself," Hollin said.

Uncle Sam's influence over student loans could soon become even greater if Congress passes legislation that would essentially drive private lenders out of the market and leave federal programs as the main resource for people seeking help paying academic bills.

The Student Aid and Fiscal Responsibility Act (HR 3221) passed the House last month pretty much along party lines. It's now working its way through the Senate.

The bill would eliminate the Federal Family Education Loan Program, thus making student loans much riskier (and hence unattractive) for banks. The Education Department would continue offering direct loans and would presumably dominate the market.

Democrats say the legislation would free up more funds for Pell Grants and other financial aid. Republicans say the federal government would be playing too large a role in higher education.
"The bill will help restore America's global leadership in higher education, paving the way for a stronger economy," Education Secretary Arne Duncan said in a statement. "The bill ensures that more students who are willing to take responsibility for their education can go to college and earn a degree."

I have no problem with the government, rather than banks, deciding who gets a college education and who doesn't, just as it's the government's responsibility to ensure that everyone gets at least a high school education.

But what about people like Lee, who have completed their schooling and now find themselves struggling to get by as their high-interest loans come due?

For the next decade, Lee is obligated to send $445 to the federal government every month. That will pay down $37,000 in loans held by the Education Department, which acquired the debt from Edamerica and another lender, All Student Loans.

The interest rates on those loans range from 6.8% to 8.5%.
Lee owes nearly $14,000 more to Edamerica at a rate of 7.25%, plus $21,000 to All Student Loans at 6.8%. Then there's $12,000 owed to JPMorgan Chase & Co. at a more reasonable 5.2% rate.
In all, Lee is on the hook for about $1,000 a month in student-loan costs.

"I'm not saying I don't want to pay," he said. "I'm just saying I should pay a rate that's fair. If 30-year mortgage rates are near 5%, student loans should be close to that."

Jane Glickman, a spokeswoman for the Education Department, said rates under the Federal Family Education Loan Program are set by Congress. Any effort to change them would thus require congressional approval.

"It may seem high today," she said, "but remember it is a fixed rate. The comparable loan would be a fixed-rate unsecured loan or a private student loan. Even with excellent credit, you can't get one of those below 12% fixed, and the majority of students have no credit at all."

That's true. But then, the whole idea of a government-subsidized loan is to help fund the sky-high education costs of people who have nowhere else to turn. These are precisely the people who shouldn't be paying above-market interest rates.

Glickman said people like Lee do have options. They can apply for help under a program that pegs monthly loan payments to income levels. Or they can postpone payments for a set period, although they'll still be responsible for repaying the entire loan, and the interest will continue to accumulate.

"The problem with that," Lee responded, "is that I'd still have to pay an exorbitant rate. I'd just get to do it later."

I'm sympathetic, but only because the government has already shown itself to be a soft touch for banks, insurers, carmakers and especially for homeowners, who in many cases had no business taking out loans they couldn't repay.

In that context, I think it's perfectly reasonable for college students and recent grads to seek a little bailout of their own.

And if these people end up in positions of responsibility, and do a better job than those who came before (which isn't saying much), taxpayers can consider the loans money well spent.
"I wonder if President Obama and members of Congress know that people are paying 8.5% on loans," Lee said.

I wonder that as well. And if so, why aren't they doing anything about it?

David Lazarus' column runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com

I am generally against the entire stimulus concept, but if we are bailing out banks, homeowners and care companies… we should consider bailing out students with loans. However… only if they are not enlisted into Americorps, Obama’s National Army or the the Obama Youth program… all in process.

This is one of the greatest problems with The Student Aid and Fiscal Responsibility Act (HR 3221). It will put the government in charge, even more, of not only the interest rates of student loans, but exchanges for repayment by serving in Americorps, a National Army or Youth Group. As well as the ultimate goal of telling kids what they can study, base on government wants and needs instead of what the student chooses or is good at.

We should be fighting The Student Aid and Fiscal Responsibility Act (HR 3221), working on using some of the stimulus money to help students with loans… without having to join socialistic youth programs, as well as taking a hard look into the plans and activities of all those organizations. ...Ask Marion~

The Beast That Swallows Its Young - Video

Related Resources:

College kids recruited to join Obama’s ‘army’

Obama Says We Need National Civilian Security Forces. WHY?

Is the National Civilian Security Force Obama Wants AmeriCorps?

Michelle Obama is Building Her Boot Camps For Radicals with Tax-Payer Money

The Dumbing Down of America Series

Posted: Knowledge Creates Power - Cross-posted: Daily Thought Pad

How the Stimulus Bill Could Kill You

By Douglas O'Brien, a public affairs consultant who served in the Department of Health and Human Services in the Bush Administration

http://www.americanthinker.com/2009/02/how_the_stimulus_bill_could_ki.html

When you read through the nearly seven hundred pages of the House stimulus bill it is easy to begin dozing off after a few hundred billion dollars worth of run-of-the-mill wasteful government spending.  One has to keep a keen eye out for the components of the bill that don't just steal your money, but that may actually do you great physical harm, if not kill you outright.

On page 151 of this legislative pork-fest is one of the clandestine nuggets of social policy manipulation that are peppered throughout the bill.  Section 9201 of the stimulus package establishes the "Federal Coordinating Council for Comparative Effectiveness Research."  This body, which would be made up of federal bureaucrats will "coordinate the conduct or support of comparative effectiveness and related health services research."

Sounds benign enough, but the man behind the Coordinating Council, Health and Human Services Secretary-designate (and tax cheat) Tom Daschle, was kind enough to explain the goal of this organization.  It is to cut health care costs by preventing Americans from getting treatments that the government decides don't meet their standards for cost effectiveness.  In his 2008 book on health care, he explained that such a council would, "lower overall spending by determining which medicines, treatments and procedures are most effective-and identifying those that do not justify their high price tags." 

Once a panel of government experts decides what is and what is not cost-effective by their definition, the government will stop paying for treatments, medicines, therapies or devices that fall into the latter category.  Initially, this will limit access to very expensive treatments for federal employees, veterans, the elderly, members of the military and their dependents and others who rely on the feds to pay for their health care.  But since this would place nearly half of health care dollars off limits for such treatments, the demand for and further development of such treatments would likely dry up.  And Daschle wants to expand the Coordinating Council's power even further, allowing the government to deny tax benefits for private insurance that covers treatments deemed too expensive by the Council.  Thus, if a handful of government employees deem a therapy not cost effective, no health insurance will cover it and it will become virtually unobtainable to patients at any cost.

Mind you, they are not simply looking to exclude treatments that don't work, but to exclude treatments that are effective, but whose cost, in their opinion, does not justify their use.  You, the patient, and your physician don't get a vote. This would make the federal government the single most important decision-maker regarding health care for every patient in America. 

This is also another wonderful example within the stimulus bill of infantile economics.  When something is new it is usually expensive, (think $3,000 VCR's back in the ‘70s).  As supply increases, two important things happen.  First, innovations take place that improve the product.  Second, the cost comes down.  If the feds step in and say, no, that new treatment is too expensive, it will never have the chance to become better, the supply will not increase and it won't become more cost-effective.  It will just die on the shelf, and so will the patients who potentially could have benefited. 

For example, scientists have found that proton beams can be used to destroy cancerous tumors by pinpointing the beam on a tumor diminishing the collateral damage to surrounding tissue that often accompanies conventional photon radiation treatment.  Five facilities in the United States offer proton therapy at places like Massachusetts General Hospital and the University of Texas.  The five can treat a total of about 8,000 patients a year.  Protons are most beneficial for children who can suffer severe developmental side-effects from radiation treatment.  But the therapy is expensive, often running over $100,000 for a six-week course of treatment.  But as new proton treatment facilities are built, improving the delivery of the therapy and increasing its supply, prices will decrease and quality will improve.  But how will a panel of bureaucrats react to this situation?  Will they allow insurance to cover a treatment that can be many times more expensive than conventional care and let it reach its full potential?  Or will it be blackballed for future patients in the name of cost-containment? 

Imagine the conversation:  Parents are told that their daughter has a brain tumor.  Doctors will immediately begin radiation treatment to destroy the tumor.  But they also tell the parents that bombarding the child's brain with radiation will likely have developmental impacts.  The doctors lament that there once was a better way to deal with this situation with a higher success rate and virtually no side effects, but some people in Washington decided it was too expensive and the centers that offered it closed and no one persisted in further developing the therapy. 

Repeat this scenario time and time again and you will glimpse health care in the Age of Hope and Change.  Emphasis will be shifted to prevention and management of chronic illness-an excellent idea and potentially very economically beneficial.  But health care will be frozen in time.  New treatments come on the market at very high costs and most often represent incremental improvements over existing care.  That is how progress works and that is why we live longer lives than our great-grandparents.  But that is exactly the kind of progress that Daschle and his Coordinating Council will be targeting in order to limit health care spending.  It is a perfect example of the way socialized medicine rations care in the name of equality of access and proves the old Canadian axiom that, "national health care is wonderful, unless you get really sick."

Now, all this time, we have been told that Republicans were the ones who only saw health care in terms of dollars and sense and that the Democrats were champions of the needs of the ordinary people.  The reality is the exact opposite.  A market-based system promoted by many Republicans allows patients to control their care rather than bureaucrats and encourages innovations that save and prolong lives.  Under this new health care order, it will be the express task of government employees to stand between you and your family and potentially life-saving care, all in the name of dollars and cents. 

No Stimulus - Sign This Petition

Dear Taxpayer,

Will you join me in taking a stand in the first major policy battle of President Obama's Administration?

Stop the Pelosi-Reid-Obama Trillion Dollar Spending Bill, Sign Our Online NO Stimulus Petition TODAY- Click Here

Earlier today in the U.S. Senate we suffered a difficult defeat as the $838 billion senate version of the Pelosi-Reid-Obama spending bill passed the senate with 61 votes.  While today's vote is a disappointing setback we cannot be discouraged.  Much of this fight still lies ahead in the next few days.

Despite today’s passage in the Senate, this fight is far from over!

The bill will still have to go to conference to work out differences between the House and Senate versions, before coming back to both chambers for another vote.  They will fight to add back as much pork as possible, including brand new pork not in either the House or Senate version.

You can fight back today by clicking here and joining the growing army of taxpayers saying NO by signing Americans for Prosperity's petition to stop this disastrous trillion-dollar debt scheme.

We've got to keep raising awareness and increase the pressure against this spending and debt outrage. Thanks to the help of our signers forwarding this to their friends and family, calling talk radio, and promoting it on the Internet, we've blown past 200,000 signed petitions! 

Just what is wrong with this bill?

• Under the auspices of a “Comparative Effectiveness Review” the package heavily funds the first steps towards the government-mandated rationing of health care and tramples your right to medical privacy.

• The so-called “Stimulus Package” is being sold to taxpayers as an investment in useful infrastructure like roads and bridges. But the facts prove otherwise. Only 3.6% of the scheme’s $838 billion price tag would actually go to real, practical infrastructure projects--roads and bridges.

• This trillion-dollar debt and spending scheme will provide little or no stimulus, but will put each and every American household in at least $6,700 of new debt, to be paid by our children and grandchildren.

It is critical that we send a loud and clear message to DC politicians that ordinary citizens simply cannot afford the crushing burden and devastating consequences of this initiative.

Please act today to make your voice heard -- and encourage your friends and family to do the same -- by signing AFP's petition here.

Sincerely,
Tim Phillips

President, Americans for Prosperity

Source:  Human Events/No Stimulus - Sign This Petition