1 day Ago
Students Aren't Paying Their Loan Debt The federal government has long been playing games with federal student loans. Since 2010 — the President Barack Obama era — federal student loans have become a major entitlement program. Borrowers are paying as little as possible, and the government is just letting the debt (now at $1.
6 trillion) accrue. According to The Wall Street Journal editorial board: Democrats say the student debt "crisis" is caused by for-profit colleges. But CBO [Congressional Budget Office] shows that many students at nonprofit and public colleges are failing to repay their loans.
After six years, the typical borrower who attended a nonprofit or four-year public college had paid down only 1% or 2% of his starting balance. Unlike private lenders, the government has no incentive to ensure borrowers are making payments. The political imperative is to conceal the taxpayer losses on student loans by reducing defaults while effectively turning the program into a new entitlement.
How does the federal government get away with this? Enter President Joe Biden's SAVE Act, which has continued despite opposition in court. This debt-forgiveness scheme simply waves the government's magic wand, and payments and interest fees for millions of borrowers are waived. It's an accounting trick to keep student loan debt from growing out.
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