Obama's Student Loans Trap

The latest Pew Research poll shows that President Obama is losing the support of the "Millennial Generation," those under age 30, who had supported him over John McCain by a whopping 66 to 32 percent. By the end of 2009, the Democratic advantage among Millennials had shrunk to just 54 percent Democratic and 40 percent Republican. And the decline is reflected in Obama's job approval rating. In February of 2009, his job performance was higher among Millennials than in any age group, at 73 percent. A year later, it was 57 percent.

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Millennials are a generation 50 million adults strong­—including younger members, bigger than the baby boomers­—and were all born after 1980, so the oldest are in their late 20s. They're very racially diverse, not particularly religious, and technological progress is just part of their lives, not something to marvel at. They've watched Sergey Brin and Mark Zuckerberg become billionaires after founding Google and Facebook. The oldest among them was born during the age of Reagan and don't remember "stagflation" or the "misery index." The Cold War was something they learned about in history class. According to Pew, they are more inclined to trust big institutions than other generations, and they have a "preference for a more expansive role for government."

They've also been ravaged by the Great Recession. The unemployment rate for those between the ages of 16 and 24 hit a shocking 19.1 percent in July, the highest mark on record for that month (dating to 1948). According to a National Journal poll this summer, only one sixth of Millennial adults surveyed say they earn enough to live comfortably. Nearly 60 percent struggle with student loans and other debt. Four in 10 get financial assistance from relatives, and one third live at home. When the National Journal asked if they'd prefer long-term employment with a single employer or the opportunity to change careers, 55 percent preferred one employer. Clearly this generation wants jobs and stability. About six months ago, the Democrats made their move to win this group.

[Read more about unemployment.]

The administration inserted little-noticed language into the reconciliation bill for healthcare reform. Here's the play: If you graduate from college with student loans and work for a public service organization, and make 120 monthly student loan payments while working at that job, any unpaid loan balance after that will be forgiven by the federal government. According to the Department of Education, public service organizations can be "any federal, state, or local government organization or agency and most charitable non-profit organizations," including the military, law enforcement, and colleges and universities. In the same presidential penstroke, the administration essentially took over Sallie Mae by barring future government guarantees of most private student loans. The federal government now runs the student loan business at an estimated cost of $100 billion per year. Not only have they eliminated any competition from banks, they've removed any incentive for colleges to keep tuition costs down because taxpayers will foot the bills.

In the old days, if you worked at the Peace Corps or AmeriCorps, you were eligible for special treatment on your loans; you could also go to any federal service academy tuition-free and work off your obligation in military service. If you attended a regular college on student loans, like I did, your loans were forgiven only if you made regular payments for more than 20 years and still hadn't paid off the balance. Now you can be forgiven in 10 years, in exchange for working at one of thousands and thousands of organizations from the public library to the dog pound. It doesn't matter what your actual job is, as long as you work 30 hours a week. When I told my teenage daughter about it, she asked, "Why don't you get any free loans if you start your own business?" Good question.

This is a bold move to make this generation of Americans dependent on government right out of the gate. Millennials who take Obama's student loan deal will be stuck in government jobs for 10 years—not building a stronger economy and creating businesses but living the taxpayer-funded life of a public sector worker. It builds antipathy toward free enterprise by steering young people away from start-up businesses, and creates another generation in debt. It's the ones who forsake Obama's offer and go to the private sector who will end up paying the bill for the ones in public service, a bill projected to be $1 trillion over the next decade.