HIGHER EDUCATION BUBBLE UPDATE: A Student Loan Bailout Would Consume 62% of New Obama Taxes.

Americans concerned about what President Obama plans to do with the $1.6 trillion in new taxes he is proposing in the a “fiscal cliff” deal have a new worry: Will it go to bailout some $1 trillion in student loan debt, leaving enough to pay for less than two years interest on the national debt?

Critics are raising that possibility on the heels of a new Federal Reserve report that student loan debt has reached $956 billion, and it’s growing.

“Outstanding student loan debt now stands at $956 billion, an increase of $42 billion since last quarter. However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been updated on credit reports this quarter. As a result, the percent of student loan balances 90+ days delinquent increased to 11 percent this quarter,” said the New York Fed.

Anxious Republicans skeptical of the president’s fiscal cliff plan and proposed $1.6 trillion in new taxes, mostly on the wealthy, are worried that the administration is planning new spending programs, not debt payments with the money.

They are turning their attention to a Democratic proposal to pay off student loan debt and the president’s focus on student loans during his many campaign stops at college campuses earlier this year.

Create a problem, then pay it off with other people’s money. Buy votes. Lovely.