Seeking to strengthen her legislative bona fides, Senator Warren has hatched a scheme to reduce the interest rate on student loans by allowing many borrowers to refinance. Warren's ostensible goal is to lessen the burden of debt--especially the poorest of graduates--so they can pay off their debt more quickly and move on with their lives.
Who possibly could disagree? To be sure, only the most heartless and selfish of illegitimates.
So, let's not consider the fact that Warren's scheme will cause the federal government to realize less income than was projected by those in Congress who legislated to make the loans in the first place. What difference does it make if yet another $1T is added to the nation's debt? After all, it's just money that Fed Chair Janet Yellen can print.
But, The Motley Monk digresses.
A study by the Center on Higher Education Reform indicates that Warren's scheme won't benefit the poorest students:
- New York Federal Reserve Bank data indicate that 37% of the 43M currently repaying federal student loans are delinquent or have defaulted. There are data indicating the borrowers who are defaulting are oftentimes students who have dropped out of college...not those who have earned degrees.
- Most borrowers who default on federal generally have lower balances--$5k not $50k--relative to those who repay. A borrower with $5k in debt who refinances from 6.8% to 3.8% (the current rate for undergraduate borrowers) would save $7/month ($84/year). But, borrowers who aren't struggling would receive the largest concession from Warren's scheme: The re-fi benefits would accrue disproportionately to the richest 25% of households, that is, high-income individuals with expensive graduate degrees.
Isn't that how it always ends up with those so-called "social justice" schemes hatched by the political Left? They decry what the capitalist system is doing to the poorest of the poor. Then, lo and behold, it ends up the political Left was seeking all along to feather the nests of its own members.
Yes, provide debt assistance to the poor who truly need it. But, don't claim that's the goal when the lion's share of the so-called "reform" scheme is skewed from the beginning to benefit the rich. Is that not what the political Left calls a "regressive" scheme when the subject is tax reform?
Let the discussion begin...
To read the study by the Center on Higher Education Reform, click on the following link: "Lowering Rates Isn't the Answer."