COMMENTARY | After three years of broken promises and failed economic policies, President Barack Obama is running out of people to bribe or harass for support. He's losing ground in key demographics of his base. A Real Clear Politics poll average shows 50.4 percent of American's disapprove of his job performance. He can't even make the Democrat controlled Congress pass his jobs bill. So this Halloween, the president decided to sidestep frustrated adults, bypass Congress with an executive order and hand out student loan tricks disguised as bailout treats.
According to the White House website, the three treats are; allowing borrowers with direct government loans and government-backed private loans to consolidate their balances, lowering the allowable student loan payment limit from 15 percent to 10 percent of a graduate's income and lowering the time-frame to achieve debt forgiveness from 25 years to 20 years.
Sounds good, right? But just like on Halloween when you dump out your treats on the floor, careful examination reveals the hidden tricks.
Loan Consolidation
The White House "estimates" that this will cut the effective interest rate on student loans by "up to" 0.5 percent.
But according to an analysis by Daniel Indiviglio -- current associate editor at The Atlantic, former investment banker and Forbes contributor -- even the highest "up to" estimate offers trivial savings.
By using high and low values of average student debt over 10 years, Indiviglio calculates the monthly savings for the average student loan borrower would only be between $4.50 and $7.75 per month.
Lowering Loan Payment Limit from 15 percent to 10 Percent
In August, the Bureau of Labor Statistics reported the unemployment rate for 16- to 24-year-olds -- those most likely to have student loans -- stands at 51.1 percent, the highest since World War II.
How do you calculate a 10 percent monthly loan payment for graduate who has no income and how will reducing their currently unaffordable payments by less than $8 per month make it more within their means?
Moreover, Obama avoids public mention that only a small number of the indentured students will qualify.
"Any borrower who graduated in 2011 or earlier will not be eligible," Indiviglio revealed, "so its effect will be felt strictly by those in school now or in the future."
Lowering Debt Forgiveness Time from 25 Years to 20 Years
When it comes to time, most 16- to 24-year-olds consider the two to four years it takes to obtain a degree to be an eternity. How excited do you think they will be when they find out they will be nearing or well into their 40s before they are declared free of their loan?
Additionally, Indiviglio points out that 82 percent of the current outstanding student loan debt "was accrued in just the past decade."
Try telling the students who are currently in their 30s and have already been struggling to pay their loan for ten years they won't benefit from Obama's new debt forgiveness for another decade.
In 2009 Obama offered the now abandoned promise of "Pay as You Go" to fool naive adult taxpayers into believing Congress would only be allowed to "spend a dollar if it saves a dollar elsewhere." Today Obama has launched "Pay as You Earn" to fool the gullible youth into believing he'll lighten the burden of student loans.
Before he decides to throw too many re-election eggs in the youth vote basket, Obama had best consider this --
Gallup shows his youth support is down 13 percent.
According to Rock the Vote, young Republicans "very likely" to vote in 2012 outnumber young Democrats by a 60 percent to 51 percent and while 83 percent of adults could cast their ballot today 49 percent of millennials aren't even registered to vote.
The 2012 election is over a year away. For kids lucky enough to find a job and want to buy a new $500 iPad or their own home one day, having an extra $4 to $8 in their pockets each month after paying their student loan into their 40s isn't going to cut it.
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