# Fox Uses Absurd Hypothetical Lending Scenario To Attack Obama's Student Loan Plan

##### Blog ››› October 27, 2011 2:14 PM EDT ››› REMINGTON SHEPARD

Attacking President Obama's student loan debt relief plan, Fox & Friends used an unrealistic hypothetical lending scenario to suggest that taxpayers will be on the hook for "a lot!" of unpaid student debt. Here's the scenario presented by Fox & Friends:

While Fox & Friends displayed the graphic, co-host Gretchen Carlson said:

CARLSON: Let's take a look at an analogy -- an example of how this would work for a fictitious person. Let's say you borrow \$212,000 for a four-year college education. Then you would repay \$28,220 on that. This is based on the fact -- you have to keep in mind what this person actually will earn when they go to the real world. That has something to do with it. So if you have to --

STEVE DOOCY (co-host): Yeah, they earn 25,000.

CARLSON: So if you only have to repay \$28,220 of those loans, who makes up the difference? Well, the bottom line is the taxpayer does -- and you can do the math there. The difference between \$212,000 and \$28,000 is a lot of money for the taxpayers to make up. I actually think this -- this plan is not only trying to court the young people, it's trying to court the parents of those young people who may in fact be helping out these young people with their student loans down the road as well.

It seems Fox & Friends got its hypothetical scenario from a column by Fox's Chris Stirewalt. Here's Stirewalt's scenario starring "Suzy Creamcheese":

Take this example: If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite \$212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns. If Suzy opts to heed the president's call for public service, and takes a job as a city social worker earning \$25,000, her payments would be limited to \$1,411 a year after the \$10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only \$28,220 of their \$212,000 loan to Suzy.

So let's break down the problems with Fox's example:

### Borrows:

This example first relies on a student borrowing \$212,000 from the Department of Education to attend George Washington University. According to the Project on Student Debt, an initiative of the Institute for College Access & Success, a college senior "who graduated in 2009 had an average of \$24,000 in student loan debt."

The National Center for Education Statistics reported the average cost of any institution of higher learning is \$17,633 in 2009-2010, \$15,014 for public four-year institutions, and \$32,790 for private institutions. Using these numbers as a baseline, four years of college would cost roughly \$70,532 on average, with the average four-year education at a public institution costing \$60,056, and \$131,160 for the average four-year education at a private institution.

The total cost of George Washington University -- used in Stirewalt's post and parroted by Fox & Friends -- is not reflective of the average cost of four-year undergraduate institutions.

Additionally, Obama's plan applies only to loans issued directly from the federal government -- and no student can borrow \$212,000 directly from the federal government. According to the Direct Stafford Loan website, the maximum amount any student can receive over four years directly from the Department of Education is \$57,500. So Fox's hypothetical -- which relies on a student borrowing \$212,000 from the government -- is already flawed.

### Repays:

The most recent US Census data clearly points out that the average person whose highest degree earned is a bachelor's degree makes significantly more than \$25,000 annually, making Fox's assumption that an individual would stay at a job for 20 years that pays \$25,000 annually extremely unlikely. Nevertheless, here is how the FoxNews.com post concluded that the borrower would repay \$28,220 over 20 years:

If Suzy opts to heed the president's call for public service, and takes a job as a city social worker earning \$25,000, her payments would be limited to \$1,411 a year after the \$10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only \$28,220 of their \$212,000 loan to Suzy.

### Taxpayers Pay:

According to the latest Census, the average person whose highest degree earned is a bachelor's degree earns \$56,665 annually. Even if such a debtor paid only 1 percent of their income annually, according to the Fox News formulation, they would still contribute about \$5,000 per year and would likely repay the entire maximum loan amount in 20 years.

More importantly, President Obama said in a speech announcing the student loan repayment plan that "[the plan] won't cost taxpayers a dime, but it will save you money and it will save you time." And Melody Barnes, Obama's domestic policy adviser explained to The Washington Post that "that the program will not cost taxpayers anything because the administration plans to use savings from the elimination of loan subsidies to pay for the reduction on interest rates on loans that are consolidated."

Combining statistical outliers with unlikely scenarios is not a legitimate way to substantiate any point, particularly this one.

Posted In
Education, College Financial Aid
Network/Outlet
FoxNews.com
Person
Steve Doocy, Brian Kilmeade, Gretchen Carlson
Show/Publication
FOX & Friends
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