Is Obama Sabotaging the Student Loan System?
July 1, 2013

We wrote a couple of weeks ago about the President’s impassioned speech calling on Congress to keep student loan interest rates low. But after reading some recent information, it feels like this plea is in contradiction to a number of policy decisions directed by President Obama that are hampering rather than helping the student loan system and impeding access to education. 

Obamacare and Federal Student Loans

These two programs don’t make sense to go hand in hand. What does access to medical care have to do with access to higher education? Nothing – nothing at all. Yet a piece of legislation passed shortly after Obamacare has inextricably linked the two – to the detriment of students. The Healthcare and Education Reconciliation of 2010 was aimed at financing Obamacare. By implementing this plan, the government effectively ended subsidizing private lenders to offer federal student loans and brought them “in house” which is generating billions of dollars in profits (or savings) depending on how you characterize it.

If the savings had been invested back into the student loan program rather than into Obamacare, interest rates could have been lowered for good rather than raised. Tennessee Senator Lamar Alexander, speaking to the Senate, said, “The Congressional Budget Office estimates that if we applied that $61 billion savings to student loans, we could have reduced the interest rates to about 5.3 percent and save the average student $2,200 over 10 years.”

Alexander said this in a speech where he pushed to keep the subsidized loan rates at 3.4% and to pay for it with billions of dollars diverted from the student loan program to pay for healthcare. Obamacare was touted as a big benefit to college students, but many students don’t support the program – see CNN video below.

It doesn’t seem fair or reasonable to ask the youngest and healthiest Americans to sacrifice their financial future to subsidize a national healthcare program. For doctors still paying off their student loans, Obamacare may present a second struggle as many high quality but small physician practices may be at risk. Beyond educating our doctors, these two programs should never have been linked and the profits should be invested back in education. Let Obamacare fend for itself and leave America’s college students out of it!

Obama and PLUS Loans

The second spoke of policy where Obama – despite his recent speech – seems to be disenfranchising students’ access to education is with the PLUS loan debacle. In 2012, with no prior debate or announcement, the Obama administration pushed through a change in parent PLUS loan credit determination that has forced more than 14,600 minority college students out of school. Historically black colleges and universities (HBCU) are in an uproar, but have been hesitant to call out Obama on the damage done to these minority colleges.

Dr. William Harvey, president of Hampton University and the president of Obama’s Board of Advisors on HBCUs, said in a speech in April, “Some 14,000 HBCU students came to our campuses last year, learned that their Parent PLUS applications had been denied and were sent back home.” Harvey said that the loan program reinterpretation has cost HBCU’s more than $300 million in this academic year alone. Dr. Julianne Malveaux, former president of Bennett College, says this is not sustainable and that, “Some of our schools may not be able to, or may not ever, recover.”

According to calculations provided by the minority institutions to, PLUS loan approvals are down by more than 2/3 overall. HBCUs had been discussing a lawsuit against the Obama administration but postponed it so it wouldn’t be an election-year issue. The election has passed, Obama has won, but where is the accountability for the damage done to minority schools by this policy shift?


Both President Obama and his wife Michelle financed their college educations with student loans. According to his recent Rose Garden speech, it has been less than a decade since they were able to pay off their loans. This is a President that knows the pains of borrowing for college – why then is he making it so much harder for students to pay for their education?

There is plenty of partisan politicking going on in the student loan interest rate debate – so much so that Congress failed to prevent the rates from doubling before they left for their summer holiday. Obama has positioned himself as being above the fray and fighting for the rights of students, but his policy decisions indicate otherwise. Email your Senators and Representative and ask them to keep student loan rates low and restore access to PLUS loans for minority students! These are two issues that can’t wait!

Please check out our other recent blogs on student loan programs, legislation and the government:

Lawmakers Epic Failure to Stop Student Loan Rate Increases

Countdown to Rate Hikes – Two Senate Bills Go Down in Flames and Obama Pledges to Veto House Bill

Obama’s Last Ditch Plug for Lower Interest Rates

Government Makes Billions While Student Loan Debt Crushes Millions

Past Due Student Loans Reach Record High – Is Gen Y Falling Through the Cracks