The Federal Government Department of Education
subsidized student loans before 2008. This can be seen
clearly by viewing a chart of First Marblehead, FMD. At
the end of 2006, FMD's stock price was about $57/share.
By the end of 2007, the stock price was less than
$20/share. Today the stock price is only $1.11/share.
The main reason for the decrease is that Congress cut
subsidies to lenders and finally took over the student
loan business entirely.
Obama's new plan is to forgive loans after 25 years.
This unfunded liability can be at considerable cost to
taxpayers. It would be easy to make minimum payments for
25 years and then owe nothing. Taxpayers would then owe
the compounded interest. The average student debt of 2010
graduates is over $25,000.
A 66-year-old woman called a radio financial advice
program saying that she went back to college in her 50s
and had finished with student loan debt of about $40,000.
At 66 she and her husband – both now on Social Security -
had paid over $43,000 back but still owed over $33,000.
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