A student loan manipulation that would make Gordon Gekko proud has been hatched by one of our leading universities. That may be a bit of a stretch. This idea is not illegal, but does cross that moral line of what is really the right thing to do. Unfortunately that line is wiped out quicker than the batters box in a major league baseball game
This is one of those types of stories that causes me to wonder why supposed intellectual people can make decisions that clearly cause a negative affect on the middle class taxpayers in America. It does increase the coffers at this university however. I guess that is the more important line. I guess.
I read about this in a column by Rodney Johnson, who is the senior editor at Survive and Prosper. We've featured some of his writings and those of Harry Dent, also part of Survive and Prosper in previous pages.
Here is how this student loan manipulation at Georgetown University Law School plays out. They have combined some federal programs together to provide for what amounts to free law school for the Hoya law students. It is really creative in the mechanism. Bernie Madoff was also creative.
Rodney Johnson reports it this way. The federal government has a program in place that allows graduate students to borrow the entire cost of that advanced degree. That means every single penny. Even the costs of daily living. They can borrow the pizza and beer money. These loans are provided by the federal government. Which means taxpayer dollars.
Mr. Johnson writes that part two of the plan is called Income Based Repayment. A student can take a government job or one of the non profit jobs on the list and commit to pay back a smaller percentage of salary for the next ten years. At that point the balance of the loan is forgiven.
Part three is probably the most clever part of this student loan manipulation. The law students must agree to borrow every single penny required for their law school graduation. They must agree to that "public service" job and apply for the ten year Income Based Repayment program. At that point the university agrees to make all payments on the loan.
Well, that sounds just great. But how can they afford that? Very simply according to Rodney Johnson. Georgetown University front loads the tuition rates. The federal government sends along the full expanded cost of this law school program. Here is a link with even more information.
Mr. Johnson reports that the cost per student, is around $75,000 per year. His estimates of the amount of forgiven student loans per student will be around $158,000. Who do you suppose is on the hook for that amount? Look in the mirror.
He furthers states that both Duke and UC Berkley are looking at similar programs for their schools. Imitation is the highest form of flattery. I wrote in the page about the growing student loan default issue, that this subsidized loan program is out of control and is really just a cash machine for universities. I also offered an alternative.
I would like to borrow former Senator Proxmire's "Golden Fleece" award again and present it to this university. He used to give this out for waste of taxpayer dollars.
This student loan manipulation would certainly qualify for the award. The idea that the tax dollar bucket never runs dry has caused this $17 trillion dollar deficit. The magic of compounding interest is a double edged sword.