student-loans

Dept. of Education Responsible for Upcoming Economic Crash and Recession

No one denies the fact that the latest economic crash and recession was the result of the collapse of the mortgage and housing industry. Many now realize that it was largely caused by predatory mortgage loans that preyed upon thousands of Americans who dreamed of having a house. The predatory loans were the result of President Bill Clinton’s orders to the mortgage industry to create loans that would allow more people to buy a house. After 3 to 7 years, millions of new homeowners discovered the reality of their creative loans as their mortgage payments began to increase beyond their ability to pay, resulting in millions of foreclosures and bankruptcies. This set off a domino effect, causing one financial and business sector after another to financially collapse resulting in the recession we are still trying to recover from.

If recent reports are true, we could be on the verge of another bursting of a financial bubble before we fully recover from the last bubble that popped and this time we have Barack Obama and the Department of Education to blame in part.

There is no doubt that prior to Obama taking office in January of 2009, many financial institutions were floundering with numerous unpaid student loans. In his typical socialist fashion Obama convinced a Democratically controlled Congress to pass legislation that allowed the federal government to take over the entire student loan programs in 2010.

The Department of Education’s Office of Federal Student Aid’s (FSA) was given task of taking control of all federal student loans starting on July 1, 2010. Along with the responsibility of overseeing the federal student loan program, they were given a directive to help more students obtain loans giving rise to a new predatory loan program preying on millions of young people that have no clue as to how their future is being swallowed up and taken from them.

After five years of predatory loan practices, the FSA is now under investigation and has been charged with inefficiency and mismanagement by the Government Accountability Office. In their report, they found that the number of delinquent payments is steadily rising. In 2013, delinquencies accounted for 8.1% of all student loans. Just one year later, 9.8% of all student loans had delinquencies.

Peter Schweizer, President of the Government Accountability Institute commented on the ensuing financial crisis involving student loan delinquencies, saying:

“They’re studying social work or they want to be a school teacher and those are very noble and important professions but the reality is you’re not going to be able to pay a $200,000 student loan back if you’re making 35, 40 or 50 thousand dollars a year.”

 

“You have students who are not incentivized to try to pay off their student loans and you have a sprawling bureaucracy that rewards inefficiency.”

Sen. Sherrod Brown (D-Ohio), also commented about the trap that students find themselves in after graduating college:

“When kids graduate with huge debt they can’t buy a house, they’re less likely to start a family, they can’t start a business, they just can’t get going in their lives.”

Perhaps the most ironic charge against the FSA is that they have been lavishly rewarding the upper FSA echelon. In 2011, bonuses averaged around $38,000. Four years later in 2014, those bonuses jumped by 96% to $75,000. Ironically, Obama has often criticized executives in the private sector for reaping huge bonuses while many of their employees live paycheck to paycheck. Yet within his own administration, top officials in the FSA are reaping lavish bonuses for destroying the futures of countless young Americans.

The current student loan debt in the US today is rapidly nearing $1.4 trillion dollars. Compared to $882.6 billion in credit card debt and the $750 billion in auto loan debt, student loans make up the largest debt class in America. If the current trend continues, it’s just a matter of time before the non-payment of student loans will burst another economic bubble. When that happens, and it’s looking like it may be sooner than you think, it will affect the entire US economy just like Clinton’s mortgage loan bubble did. Only this time, America is not nearly as economically sound like it was when the mortgage bubble popped, which means the likely recession could hit harder and deeper and take a lot longer to recover from, if we can recover at all.

The truly ironic and sad part of this is that the next president will be blamed for what Obama set up, just like Bush got blamed for what Clinton created. If a Republican wins in November and the student loan bubble pops in the next 4 years, the GOP will bear the brunt of what Obama did. I just wonder who Hillary will blame if she wins in November?

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Dave Jolly

R.L. David Jolly holds a B.S. in Wildlife Biology and an M.S. in Biology – Population Genetics. He has worked in a number of fields, giving him a broad perspective on life, business, economics and politics. He is a very conservative Christian, husband, father and grandfather who cares deeply for his Savior, family and the future of our troubled nation.

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