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Wednesday
Oct262011

Obamanomics and the Economics of Repaying Student Loans

President Obama is barnstorming a randomly-selected portion of the country today to announce he is reducing repayment requirements for people who have taken out student loans.

He is doing this in two ways: reducing the amount ex-students have to pay right out of school when their income is, he presumes, lower, and unilaterally "forgiving" debt that is not repaid after 25 years.

The President's sense of economic reality is, as usual, creative. We do young people no favor by deferring their financial obligations until they have had time to marry and have children, the raising of which is more expensive than the typical young-single or married-no-children lifestyle. (But perhaps that's why the President insists on "forgiving" leans unpaid after a quarter-century by making taxpayers foot more of the bill for educations at those universities that best manage to combine high prices with market uselessness.)

The President may also be unaware that most parents do not have the luxury of having a mother-in-law move in to do much of the child-rearing for them. Those student loan payments can look pretty comfy next to child-care bills; the President's thought to defer student loan repayments until child care costs are also a consideration is, as I said, curious.

But perhaps I am too harsh on the President. He may have a method to his madness. By keeping the unemployment rate unnecessarily high he has reduced the need for out-of-house child care by seeing to it that one or both parents are more likely to be home.

I do agree with the President that 25 years after college is no time to be repaying student loans. Saving for old age (note that I do not say "retirement") should increasingly be a priority as both Social Security and Medicare are insolvent, and yet, the current occupant of the White House is more concerned about student loan repayment schedules.

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