How Obama Deceived the Nation on Student Debt

A lot of misinformation and false promises happened under Obama’s tenure. We were promised cheaper healthcare, and instead the cost doubles every year.

We were ensured reduced foreign intervention, and instead Obama commanded even more military operations than Bush.

The guise of net neutrality was used to further empower a small group of internet providers.

The list goes on and on like this. One of the most deceptive and harmful forms of deceit only recently came to light. Apparently, all of the numbers we’ve been using to observe and manage student debt have been completely wrong.

The Update

For years the reports have told us that student debt is climbing but is still being managed. Even in 2016, the reports showed that the default rates were normal and not at all threatening.

On January 13, right before Obama finally left the White House, a revised report showed that student debt payments had been overestimated. These kinds of things happen often in finance, so a little more debt should be nothing to incite a panic.

The scope of the error, though, is completely unprecedented. The revised study shows that the Department of Education had been overestimating loan repayment by 99.9 percent. To clarify, that means they underestimated defaults and delinquencies by a factor of a thousand.

How can such an error even be possible? While those in charge called it a “systematic error,” a savvy mind can see through the problem easily. The researchers used data from 357 schools to calculate student repayment rates. The updated numbers come from a nationwide sample size that drew data from well over a thousand schools.

With the larger sample, it became clear that more than 25 percent of colleges and trade schools have failed to receive even a single dollar of loan repayment from more than half of their students. The result is that for every default that was reported before this, there were actually 1,000 defaults.

The methodology shows obvious cherry picking to substantiate claims that there is no debt crisis. Releasing the truth in the last week of the Obama Administration is an obvious political power play, intended to dump a major problem on an unprepared public and new administration.

Expanding the Problem

Massive loan defaults are already a problem, but there looking at IDR plans shows that it is even worse than it seems. Income-driven repayment (IDR) loans are a commonplace way for students to borrow from federal resources. The plans are designed to help students with large debts and lower incomes.

The premise is simple: loan repayments are tailored to the borrower’s rate of income and adjusted for factors like family size. That alone is harmless, but IDR plans have all debt forgiven automatically after 20 or 25 years, depending on the plan.

This shows us two things. First, even though the necessary payments are reduced to make the loan burden easier to handle, students are still defaulting. Keep in mind that roughly 25 percent of all student loans are IDR plans, and when you compare that to the student debt loan of $1.26 trillion, it shows that the federal government is currently on the hook for $315 billion in IDR plans alone.

This is the second issue that is highlighted: loan forgiveness plans are actually 1000 times more expensive to taxpayers than previously thought.

Loan Forgiveness

Federal student debt forgiveness plans have been a major talking point for a couple of years now. In last year’s elections, candidates on both sides, including then candidate Donald Trump, were open to the idea of instituting more help for borrowing students.

Of course, those ideas were based on the premise of overwhelmingly inaccurate information, but the sentiment is there. Now that we can see how much more expensive any plan would be, it creates a frightening prospect.

Even worse, many debt forgiveness programs already exist, and they cover a good chunk of the students who aren’t currently paying their loans. As things stand, the federal government is likely going to be burdened with an additional $300 billion every four years to cover loan forgiveness. This is money that is outside of the current budget, which makes Trump’s job even harder.

Ultimately, Obama and his people made a power play to subvert their succession. They intentionally deceived the country on an issue that demands transparency, and the result is an impending budget crisis that was intentionally manufactured.

They made it clear that impeding Trump’s success and hurting the American people was more important than a graceful departure, and this maneuver falls perfectly in line with all of their narratives and actions.

Regards,

Ethan Warrick
Editor
Wealth Authority


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