Gingrich calls Obama student loan proposal a 'Ponzi scheme'

Presidential hopeful Newt Gingrich said President Obama's recently announced student loan proposal was a "Ponzi scheme."

Obama's plan would allow for easier consolidation of outstanding student loans, and would forgive outstanding balances on federal loans after 20 years of payments, rather than 25. Federal loan repayments would also be capped at 10 percent of a borrower's income, down from 15 percent now. The president would begin implementing the changes next year, as opposed to the 2014 start that was currently planned.

But Gingrich (R-Ga.) says that Obama's plan lies to students "by promising to every young person, 'You won't have to pay off your student loan as a student.' " Instead, the former Speaker of the House says, those who benefit from the program will just "have to pay off the national debt" as taxpayers later in life.

He went on to say that the proposal was "a Ponzi scheme even by [Texas] Gov. [Rick] Perry's standards," riffing off his primary rival's remarks on Social Security.

Gingrich was speaking at an education forum in New York attended by a number of Republican candidates.

Michele Bachmann, who is also running for the presidency, also criticized the plan at the forum, saying it created a "moral hazard."

"There is a morality in keeping our financial promises, and I don't think we should push that off onto the taxpayer," Bachmann said. "The individual needs to repay and be responsible for repaying their student loan debt."

The Minnesota congresswoman also echoed comments by Speaker John Boehner (R-Ohio), who said Thursday he was concerned about the constitutionality of the administration's decision to change rules without congressional approval.

"I believe it is abuse of power from the executive to impose via an executive order a wholesale change in the student loan," Bachmann said. 

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