Obama's Education Reform Act Might Cost Us More Than We Thought
Alright everyone, I have a confession to make. I am a Conservative. Especially when it comes to how our government spends money. I don’t think there should be government incentives to buy new cars or new houses. I don’t think there should be millions of government handouts. It makes me ill to see how high our national debt is. (It’s almost $13,000,000,000,000.00 right now, and rising every day.) And, I hate to say this, because I know how many people are excited about the new government regulation of student loans, but I can see it easily driving up our national debt even more.
The new Education Reform Act places the government in charge of regulating student loans. As part of the Student Aid and Fiscal Responsibility Act, the federal government will lend directly to students, according to Al-Jazeerah.com. This is really good for students who take out loans in order to attend college because it will put a cap on the amount of loans they must repay each year and will lessen the financial strain of earning a higher education. It also provides funding for minority and community colleges that desperately need it. Those are definitely good things.
The bad news, in my opinion, is that this money will be lent from the U.S. Treasury. The U.S. Treasury will lend this money to the Department of Education at 2.8 percent interest, and the Department of Education will lend it to students at 6.8 percent interest. In a perfect world, the Department of Education will earn 4 percent interest off of every student loan. Unfortunately, we do not live in a perfect world.
Many students default on their student loans. So many, in fact, that the Department of Education has released a guide on avoiding default on loans and tips for repaying defaulted loans.
Hopefully the majority of students will repay their government-funded student loans. However, I predict that this reform may end up costing the government more money that it bargains for in unpaid debt.