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"When student loans don’t get repaid, debts are going to be transferred from the borrower to the taxpayer," further raising federal deficits, he said. And overburdened student-loan borrowers may fail to qualify for mortgages and "stay much longer in their parents’ homes," Gault said. Young adults forming households have historically been the bulk of first-time home buyers — and their scarcity could dampen any housing recovery.
"When kids do graduate, the most daunting challenge can be the cost of college," Obama said in his State of the Union address, asking Congress to extend a temporary cut — due to expire in July — in federal student-loan rates. The reduced federal rate is now 3.4 percent. It the cuts aren’t extended, it will rise to 6.8 percent.
GROWING DEBT » Surging above $1 trillion, U.S. student loan debt has surpassed credit card and auto-loan debt. Average student loan debt recently topped $25,000, up 25 percent in 10 years.
GOVERNMENT-BACKED » The mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed.
POLITICAL CONTEXT » President Barack Obama has offered a raft of proposals aimed at fine-tuning the system and making repayments easier. Yet the predicament of debt-burdened former students has failed to generate much notice in the GOP presidential campaign.
Still, Obama said: "We can’t just keep subsidizing skyrocketing tuition. We’ll run out of money."
Obama also asked Congress to extend the current tuition tax credit, double work-study jobs over five years and let borrowers consolidate multiple student loans at reduced interest rates.
But in this intensely partisan year, any congressional action seems dubious.
"I wish I could tell you that there’s a place to find really cheap money or free money and pay for everyone’s education, but that’s just not going to happen," Romney says. "Now the government is taking over the student loan business. I think you’ll get less competition."
The government has not taken over the student loan business. The private loan industry is still writing student loans, usually at interest rates far above the government ones.
What the Republicans are zeroing in on is a section in Obama’s health care overhaul that eliminated big banks as middlemen in managing federal school-loan programs. Also, the new federal Consumer Financial Protection Bureau is clamping down on the lightly regulated private student loan industry.
Santorum, who now says calling Obama a "snob" for promoting higher education was "probably not the smartest" choice of words, has been seeking to rally blue-collar support by emphasizing that many jobs do not require college degrees — and suggesting many colleges are liberal bastions.
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