Fixing Student Debt Problems, Or Not

Someone sent my EMail address to Nation of Change.  I suspect my Middle Brother.  Best I can tell Nation of Change is an amalgam of Amy Goodman's "Democracy Now", Occupy Wall Street and the Elizabeth Warren Senatorial Campaign.

At any rate, they have an article up on the student debt problem, part of the larger education bubble issue.

Member of Congress Hansen Clarke (D-MI) has released HR 4170, the Student Loan Forgiveness Act.♠  It's sponsor claims that the bill, if enacted, would stimulate the economy and protect people struggling to repay their student loans.  From the article:

Clark announced, “It’s time for Congress to stand for the rights of student loan borrowers. It’s time to forgive these student loan debts.”

The bill provides that if a student loan borrower makes payments equal to 10% of their discretionary income for a period of 10 yrs, the balance of their federal student loan debt will be forgiven.

There it is.  While ignoring the hard work of all those students who have paid back their college loans, we are going to help those who haven't.

The reason this is being referred jointly to the Committee on Education and the Workforce, and in addition to the Committees on Foreign Affairs, and Armed Services may be this part of the bill, where Pixie Dust is sprinkled:

SEC.  7.  OFFSET.

Funds appropriated or otherwise made available for a fiscal year to carry out this Act and the amendments made by this Act shall be made available from the funds available for Overseas Contingency Operations.

Overseas Contingency Operations are "Off Budget".  Now, if this gets to the US Senate, the Majority Leader, Harry Reid, won't understand the concept of Off Budget, since the US Senate hasn't acted on a budget in over one thousands days, but that is a different issue.

The way to understand this funding is to think of it as coming from the pool of money paying for military operations in Afghanistan.  Put another way, it is underfunding operations being conducted by our Service men and women engaged in combat or combat support.  Yes, it is possible there is some surplus from our exit from Iraq, but remember, Overseas Contingency Operations are paid for by a loan to ourselves; that is, we print money and hope against hyperinflation.  So far, so good.

Speaking of inflation, this act would cap student loan interest at 3.4%, which means I will get precious little interest on my money in savings.  That, in turn, will help explain why people won't put their money in savings.

Regards  —  Cliff

♠  It's latest official title is "To increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers, and for other purposes".