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AEI Economist Kevin Hassett calls the president’s plan to help those afflicted with college debt, “welfare for smart people.”
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Breaking news we warned you about this right here on the show yesterday now we know it's happening a massive taxpayer funded student loan bail -- Hi everybody I'm David -- thanks for joining us tomorrow the president will unveil his plan to put American taxpayers more on the -- than they already are for millions of risky student loans.
And he's gonna make it easier for those students to avoid paying off everything they all on the loans.
My first guess is calling it the planned -- welfare for smart people economist Kevin has said He is with the American Enterprise Institute.
Explain welfare for smart people.
-- basically what President Obama is doing is he's taking our mining and using it to bail out college students all around the country he's throwing our money at them.
And the fact is that that -- -- some of them have had a hard time get a job and so on but most of them don't need our help.
You know people go to college make much higher salaries than people that don't and so there's just no justification for this you know this is worse than cash for clunkers in some sense because.
He's allowing students to not pay back their loans after twenty years they can just they're just forgive them -- -- can't -- us economic -- for those who might not know what the plan is.
There already was was in place supervision that after.
After 25 years I figure was you could be to get you could get off the hook from paying your loans back right he's gonna he's gonna shorten that timeframe.
Yet he's got a chart is -- shorten the timeframe.
And it the other thing that they're doing is they're they're doing something that they're called they're calling consolidation and and what it means is that.
If you have an existing loan you can consolidated into a federal loan.
And it'll have a lower rate.
The problem with that is that there are a lot of private businesses that loan money to students to you know and ordered their run a business and help them go to college and make a profit.
That are sitting on some nice -- now that are paying them a nice healthy interest rate and the government's basically stealing their money.
That they've changed the lives -- you get to take that loan that you made to a private business that -- ends to have the government -- -- right now and then turn it into a government debt and how so that's terrible how does that turn into taxpayers paid for.
All we are because then basically first of all we're paying the students the -- are paying a very low interest rate and so the taxpayers are on the hook for that.
But the other thing is that allow the -- are gonna default on these loans and when they do it's the taxpayers are gonna have to pay the bill.
Are you sure that they're gonna default I know that rates have come up default rates -- what now about eight point 8% correct.
Yeah that's that's right yeah and and so it's a very very large share of of these -- -- it -- can be turned into defaults.
And and it's C does not gonna be -- biggest Fannie and Freddie but it's the same idea and you'd think these people would learn.
You know what are they gonna stop taking our money in just throwing -- whatever they decide to throw it at -- each stay now Kevin I have had debates with people from the administration on this they say hey look.
If anything this is gonna lighten the load on taxpayers because before.
You used to have the banks originate the loans the banks would service the loans.
And they were guaranteed by the government we just got out that we just take it out the middleman.
That all the activity did the bank was doing was middleman activity we've remove that made the whole system more efficient -- respond.
Yeah I guess the whole system being more efficient is something I really wonder about because you know the government doesn't run anything in a more efficient way.
And so the private companies that used to dominate the student loan industry.
You know they offer good service they have they got -- -- the the bill on time may help counsel you on what to do and I a bit basically got to -- wait in line for the government to tell -- what to do -- -- so it's a much different process today and an anti government -- -- definitely taken over the student loan industry they definitely shut down a lot of profitable private businesses with a capricious change in law.
But that I think they're making students better off.
Now this is also being done by the way most of it I don't know if executive orders -- right way to put it but without.
Congress -- employed.
What do you think of that maneuver.
Yeah I I think fit President Obama is always looking for angles you know we see this with the health care bill to -- obamacare.
Where you know in some states have to -- here to -- lots of states don't and it's the presidential -- to decide and I think that that's kind of what we see.
Is that what He has a social objective when He wants to spread the wealth around and he's willing to do it anyway He can and and this is a really striking example because he's stealing money.
From private businesses and throwing our money ultimately at students that probably don't need it.
Because they went to college they've got good college degrees they're gonna have good jobs are you say stealing money by the way that's that's a pretty loaded word there.
I well I feel very strongly about this that today that if you know the government sets roles and then you build a business that loans money to students.
At and then basis snatched the business out from under you by changing the rules then that's a really terrible thing right the people invested their capital in the business under the old book rules will lose a lot of money and they'll do it because of the caprice of government.
And and make no mistake that you know the left to the Democrats absolutely hate that.
You know the capitalists bit bitter lending money to students even though they're the ones that that made the education possible the first place -- up.
And I think that the student loan takeover is just another example of their desire to have government take over as much as possible kind of like that the government take over GM as well.
Kevin has it from the American Enterprise Institute Kevin thank you very much.
