From President Obama's remarks yesterday at a Univision Town Hall:
starting in 2014 -- so right about when you guys are -- some of you are starting college, in some cases some of you will be right in the middle of college -- we're going to institute a program whereby your loans repayments will not have to exceed more than 10 percent of your income.
Now, this is something very important for all of you, because -- (applause) -- I speak from experience. Michelle and I, we didn't come from wealthy families. So we came from families a lot like yours, and we had to take out all these student loans to go to college and law school. By the time we were out, we had, I think between us, $120,000 worth of debt. It took us 10 years to pay it off. And we were lucky because we both got law degrees; we could make enough money to pay that debt.
But let's say that we had wanted to teach, and we were only making -- what's a teacher making these days? (Laughter.) Not enough, is what somebody said. (Laughter.) Or you wanted to go into public service, or work for a non-profit. You might not be able to make enough to afford servicing $120,000 worth of debt, or $60,000 worth of debt. So what we said is we're going to cap at 10 percent. And we will give you additional help if you go into helping professions like teaching that are so important to our future.
George W. Bush started down this road with the Public Service Loan Forgiveness Program created in the College Cost Reduction and Access Act of 2007. President Obama went further down it with the provisions in his health care bill limiting student loan repayment to 10% of income with forgiveness after 10 years. It's hard to overstate what a bad idea this is. The effect will be to reinforce class divisions in America by encouraging students with loan obligations (the poorer ones) to enter lower-paying professions, so they have to pay less back and get their loans forgiven. Then their children will need government loans for college, too.
It really says something about Mr. Obama that the "problem" of students choosing because of loan obligations to go work for investment banks or corporate law firms rather than non-profits is something he wants to spend federal money to address. If people are so desirous of entering lower-paying professions, let them work in the private sector for a few years, pay off their loans, and then quit for lower paying jobs. But why should those who work in higher paying professions by choice (with the longer hours and greater risk that those higher paying professions often entail) be taxed to subsidize the choice of others to work in lower paying professions? It's a slippery slope from this logic to a government order that all professions pay the same wage, so that no one should be lured away from teaching or "public service" by the temptation of higher wages in the private sector.