NEIL CAVUTO, FBN HOST: First our top story no doubt occupies the hearts of a lot of you occupiers.

The president of the United States all but saying the college bills you owe, now you don't. But now to the party-pooper if the president gets his way forgiving student loan debt you can just kiss student loans good-bye.

Richard Vedder says that means the folks occupying Wall Street will be rallying against a greedy class system, and returning college education to what it once was, a greedy class system that favors the rich over anyone else? Very good to have you, Richard. What do you make of this plan first off in the aggregate?

RICHARD VEDDER, CENTER FOR COLLEGE AFFORDABILITY: Well I think the president's plan is, makes no sense from an economic point of view. It is worse than makes no sense. It is potentially very bad.

And as you said in your lead, Neil, it leads, I think the way to ultimate forgiveness of student loans which would be utterly disastrous for the American society, sending exactly the wrong message. And, so I think the only justification for it is short-term political gains that the president sees with respect to his political supporters, the Occupy Wall Street crowd and so forth.

CAVUTO: Well they must love this, I mean, just think about it though, Richard. I mean, the rules are kind of loosey-goosey on this. Maybe that is by design but as far as the repayment qualifications, they are next to nil. There is a lot of wiggle room to get out. A lot more excuses to get out. Be that as it may, you're worried about the long-term impact period beyond just saying someone can walk away potentially from their obligations. Explain.

VEDDER: Yes, exactly. The student loan program in my judgment has been an unmitigated disaster from the beginning. It is an unmitigated disaster because first of all it was designed originally to help poor people.

Thirty five percent of the people, 35 percent of people making 100,000 or more a year where the parents make 100,000 more a year are getting guaranteed student loans from the federal government.

So this is not a low-income program necessarily. And, a smaller percentage of low-income kids are graduates of college than was true in 1970 before it began.

Also, the program has pushed up the price of college a lot. It has increased the demand for college and has generally been a disaster however you look at it.

CAVUTO: Richard, you got to let us know how you feel. Sometimes I don't know where you're coming from.

VEDDER: Yes, I know. I know. You have that problem too, you know.

CAVUTO: But you know, Richard, you raise a good point. I take a slightly different view on value of this whole student loan program. I do worry about this though. That those who do pay their bills, those who do try to dutifully pay back the government for an obligation they took out when they were young and they wanted to make good on that and pay back on that, what's to stop future loan recipients, if there are many down the road, to do the same thing, thereby continuing to break contract law and every other law?

VEDDER: Absolutely. When you keep changing the rules of the game, you keep changing the contract, people are going to say, "Ah the contract doesn't mean anything. It will be changed next year or the year after. So I can be as irresponsible as I want." You have one class of people, highly responsible people, some of them pretty poor who work hard. They pay off their student loans. Now the other people aren't necessarily bad people.

Some of them do have financial difficulty but they haven't paid off their student loans. Why favor one group over the other?

CAVUTO: But that's what is going to happen here, Richard, right? I mean these very, not all but a lot of the Occupy Wall Streeters, many of them want forgiveness of their student loans or more flexibility know that by getting them forgiven they were going to go back to a two tier educational system, say what you will of whether this a wise strategy for the government to be involved. I see your doubts there. But you're going to wipe it out for all the folks who follow you simply because you couldn't and wouldn't pay back your loan?

VEDDER: Absolutely. We have, it's creating a horrible precedent for the future. It's going to add to a program. As I - problem. As I said say it is a bad program to begin with. This compounds the program difficulties by making people even less responsible about paying back the loans. And these are young people. These are people who are making their first contractual arrangements.

CAVUTO: Right.

VEDDER: And when people are told, you don't have to pay attention to the rules, you only have to pay back 10 percent of your income, whatever it is in loan repayments because it might be tough for you to pay 12 or 14 percent.

CAVUTO: Oh sure, sure.

VEDDER: What kind of message is that saying to young people? What is that saying about the system? Why would lenders in the future outside of this area make loans to people? Because maybe the government will do the same thing somewhere else.

CAVUTO: Absolutely. You know, Richard, what kind of message are you sending, other economists when you make so much damn sense. Richard Vedder, thank you very very much. Good seeing you again.

VEDDER: It was great being with you.