Is Student Loan Forgiveness Obama's Next Crisis?

Government: President Obama wants student loans to be more like student handouts. Too bad he hasn't learned one of the lessons of the 2008 mortgage crisis: Free money costs plenty.

The global financial crisis has its roots in the U.S. government's politicization of mortgages. Washington decided that all those real-life versions of mean old bank president Mr. Potter from "It's a Wonderful Life" shouldn't just turn into big-hearted Jimmy Stewarts.

No, they should practically become welfare officers, doling out money to people with bad credit ratings to buy homes, without requiring a down payment.

And when this pyramid scheme collapsed, the investors who bought the safe-seeming, sliced-and-diced mortgage debt were left holding the bag.

And millions of Americans lost their jobs.

Making a loan of hundreds of thousands of dollars to someone is serious business, but the government for years systematically pressured mortgage lenders with accusations of racism. Many feared the Department of Justice more than the default risk of their debtors.

Now President Obama proposes applying the same mortgage mistakes to student loans.

On a day on which the College Board reported the cost of public colleges rose 8% - about twice the inflation rate - Obama unveiled a student loan forgiveness plan.

Under his plan, loan recipients would repay at just 10% of their income instead of the current 15%. And the government forgives what's left after 20 years.

For more than 1.5 million Americans, the president suggests, more money would be available for things like - you guessed it - buying homes. Many, in fact, would end up paying back only a tiny fraction of the hundreds of thousands of dollars borrowed from U.S. taxpayers.

Remember, earlier in his term of office the president and congressional Democrats did a full federal takeover of the college loan business. So Obama can unilaterally change student lending rules all he wants.

But the latest Rasmussen survey found only 21% of Americans favor letting college loan recipients not have to pay the money back.

Could it be that the 66% majority opposed to student loan forgiveness have learned the mortgage crisis lesson to which Obama seems tone-deaf? Or that they think the younger generation might learn something their liberal college professors haven't taught - namely the morality of keeping their financial promises?

Could it further be this majority realizes the integrity of our financial system is endangered when millions of borrowers start thinking debt never has to be paid back - and therefore start borrowing irresponsibly?

Obama Education Secretary Arne Duncan let the cat out of the bag on the wealth redistribution angle of the loan overhaul during an MSNBC interview Wednesday, saying America should "stop subsidizing banks and give that money to young people."

If the president wants a debate on giving more money out for higher education, fine; the way Obamanomics has devastated the economy, the belt-tighteners would win that discussion.

But as we saw with mortgages, when loans stop being loans, individual financial responsibility ends.