I'm a lifelong academic that didn't pay off my student loans until I was 40, although they were modest, not crushing, and ultimately worth it. I'm in favor of canceling some student debt, but would add a few things that should be accounted for if Biden does this:
1) The people most harmed by their student debt are those that racked up some debt without graduating. They should be prioritized. The loan amounts will generally be smaller (say, $10K-20K) to forgive and the effect will be greatest. We have sold the idea that everyone should go to college, and there are a bunch of people that get swept up in that idea that weren't prepared for college, had too many adverse life situations to succeed, etc.
2) Larger amounts of loan forgiveness should be offered to those that are willing to do jobs we need, e.g. K-12 teaching in public schools, nurses, etc.
3) For political and social reasons, I think student loan forgiveness should be accompanied with an offer of free community college or trade school for anyone that wants it.
4) Universities, especially private universities, have profited handsomely off of the current student loan system. As student debt has piled up, universities have massively expanded the ranks of administrators and created a self-perpetuating bureaucracy that does little of value. Simultaneously, university administrators have systematically under-invested in instruction and turned teaching at the university level into part of the gig economy. A majority of university courses are now taught by temporary, insecure, underpaid labor.
Student debt relief should be accompanied by measures to reform this situation. For example, some government-backed student loans could only be available to students that attend universities where the ratio of money spent on education / research vs administration meets a certain threshold.
I don't know, I think Matt's suggestions have a bit of Brookings-brain going on. Each individual carveout and exception makes sense and probably polls well but too much of it and you have a partial non-refundible tax credit for qualifying child care expenditures incurred in an economically distressed zip code, with a phase in and phase out. No layperson will understand the thing as a whole.
My preferred loan forgiveness plan would be to focus on interest. Set the interest rate on all federal student loans to zero. But do it retrospectively, too: treat all past payments as payments toward the principal and forgive any portion of someone's debt load attributable to interest.*
This would result in a lot of people having the entirety of their debts forgiven (think of the sob stories of debtors who borrowed $15k, have paid back $20k, and still owe $15k). It alleviates a lot of the sensation of a creeping, looming debt load that I think causes a lot of dissatisfaction. But importantly, it's not as readily susceptible to criticism that it's an unfair handout for elites. Everyone pays back every cent of what they borrowed, but the government doesn't make any money off of them. Some people who already paid off their student loans maybe feel a little bitter, but not nearly to the same degree as full-scale debt forgiveness. And you can say it in a sentence: Biden got rid of past, present, and future interest on student loans. But I think it'd be nice to do a blanket $10k (or more, why not, right?) too; it doesn't have to be an either/or.
*I have not researched the statutory authority here but if debt can be forgiven straight up and Trump can suspend interest unilaterally I anticipate that approach this would be lawful.
Disclosures: am lawyer married to doctor, total debt burden presently exceeds half a mil. So I didn't love the professional school carve out ;)
I think you’re underestimating the blowback of what is essentially a welfare program for people who can work from home coming from the same party seen as responsible for putting a lot of poorer service industry workers out of work. The better analogy is probably a corporate tax cut in terms of giveaways to already-fortunate people, and it will be resented (from what I recall, this did not help the GOP in the 2018 midterms).
I feel like there is a significant difference between Trump's farm bailout and student debt forgiveness that could make it politically toxic for Democrats. Specifically that student debt forgiveness plays right into the conservative narratives about Democrats: "Democrats are raising taxes on regular hard working Americans to help people who were irresponsible with their money and/or rich liberal elite college grads." As you point out, the only reason Democrats are focusing on this over other forms of spending is that this can actually get done. However, to the average low information voter, it sure seems like Dems prioritizing young, coastal liberals over the needs of "normal Americans."
My concern is less about the politics. College cost inflation has been an awful disease afflicting America and a one-off debt cancellation is like giving a cancer patient a one time shot of morphine. I guess it’s better than letting them writhe in pain, but shouldn’t we at least be trying to do something about the cancer?
I think that there will be resentment from the same people who support Trump (non-college educated rural whites), a portion of whom the Democratic party needs to win back in the next two years if they want to keep the House and maybe win the Senate. It is not fair, but that is a real cost Democrats will have to pay for passing even a limited and means tested student loan forgiveness. I also have to pick a bone with the comparison to the farmers subsidy; that subsidy was to compensate farmers for the loss they suffered directly because of actions of the US government. But the students took on these loans willingly.
The problem with this topic, student loan forgiveness, is that those pushing the idea are not being honest about their motives.
If the goal of this policy is to help those, mostly poorer people, being crushed by student loan debt; then the obvious solution is to change bankruptcy laws to allow bankruptcy judges to vacate the debt, as they can do for virtually all other types of debt. Why is there so little discussion about the bizarre status of student debt as being untouchable during bankruptcy proceedings?
The reason is that the true motivation for student debt canceling is a first step toward “free” college. Canceling college debt is indistinguishable from college being free.
Now go ahead and agree the pros and cons of free college and if all agree that’s the right thing to do, then there is a certain logic in canceling existing debt in the name of fairness...but let’s be honest about what is trying to be achieved with student loan debt canceling; or at least add bankruptcy reform as a very practical and achievable solution to the problem of people being crushed by student debt.
Not saying anything others in the comment section haven't already but I find the idea of student loan forgiveness offensive. I read it as a bribe to increase youth turnout. I might be unique tho in employing non-college technicians who made a business decisions that college wasn't for them. All this would do is reinforce that the game is rigged against the working class. This issue + M4A cost Bernie my vote in the primaries.
I was speaking to my coworker the other day. His daughter is going to University of North Carolina. He saved his whole life to send her there. Last week he applied for a student loan for $20,000K (in her name)
Figured he’s $20,000 richer if they cancel student loans, if not he’ll just pay it back immediately when she graduates. At most he loses fees and interest.
The real problem: what good does canceling student loan one time do?
What happens when the current cohort of students, graduates with a bunch of loans in two years? Four years?
Not only will you have resentment from the people that didn’t go to college, there will be resentment from people that paid off their loans, and resentment from the people who have loans in the future.
The attack ads will be lit.
Show Juan, married with two kids, works is an auto mechanic, gets nothing.
Then show Karen, single, marketing consultant, bullshit degree from some college, from an upper class family, gets $20,000 windfall.
Let’s just say... this has the potential to alienate a lot of people.
Student loan relief should only be done as part of a broader package. And it better include shit for working class people.
The whole subject gets me riled up. It’s like the housing bailout all over again.
I will burn shit! (Just kidding, but I will remember it at election time)
Is it no longer true that a four year degree has a lifetime benefit of $750,000 to $1,000,000? If college degrees have big benefits for the degree holder, it makes sense to me that they pay for it.
If it's not true and there's no lifetime benefit, I think we need to revisit the whole idea of federal student loan programs.
(I anticipate this post will make me even more unpopular than I already am. :-) )
As a well paid lawyer with huge student debt I object on the following grounds:
(1) part of this is generational unfairness. Lawyers have always made high salaries, but I owe 300,000 in debt while people who graduated 20 years before me owed well less than half of that even in inflation adjusted terms
(2) I took on huge debt because I came from a middle class family who could not put me through law school. The people who went with me to law school who don’t have debt are absurdly rich and are only going to be more rich because they make the salary and don’t have the debt
(3) while I make a very good salary, I’m only realistically going to do so for about 5-6 years before I’m kicked out of a big firm by the up-or-out system. That’s not enough time to even get myself in the black
(4) I only am working at this big evil firm because I owe huge amounts of money, and I hate the job and my life. I don’t want to have to do this!
Is the policy you’re talking about a one-time thing? Or is there talk about how to deal with people who take out a loan the day after their debt would have been canceled?
On a purely PR level, this would be a huge boon to the GOP and show what an elitist party the Democrats really are. Most working class people don't even want to go to college for a variety of reasons. Even your dumb ethnic studies major graduate is likely miles ahead on writing skills, reading, and future income potential than her peers who only have a shitty public school high school diploma and yet she gets "free" and the peers pay for it?
I don't see the individual tax implications of debt relief income being discussed much. It seems like the biggest actual problem with this plan. Are we in danger of an Oprah effect, giving folks tax liability they can't afford from phantom income they can't spend? Does the Biden admin's authority to forgive debt extend to its treatment as income by the IRS?
I just find it hard to accept that student loan forgiveness won’t cost anyone else anything. It seems like it will cost the amount of the forgiven loans - it’s just a straight transfer to people with debt from people without.
I know the bonds are negative interest rates, but the government still does have to pay them back at some point (just less than they borrowed).
I don’t really understand why - given your argument that basically any way for the government to spend money is good - you don’t endorse canceling all student debt. What’s bad about giving a bunch of money to rich people, if government spending is better-than-free right now? What’s the limiting principle?
Also, I thought the arguments about not means testing programs in One Billion Americans were persuasive and they (mostly) apply to this. You could just keep the forgiveness to fairly small amounts per household and it would be less regressive.
I'm a lifelong academic that didn't pay off my student loans until I was 40, although they were modest, not crushing, and ultimately worth it. I'm in favor of canceling some student debt, but would add a few things that should be accounted for if Biden does this:
1) The people most harmed by their student debt are those that racked up some debt without graduating. They should be prioritized. The loan amounts will generally be smaller (say, $10K-20K) to forgive and the effect will be greatest. We have sold the idea that everyone should go to college, and there are a bunch of people that get swept up in that idea that weren't prepared for college, had too many adverse life situations to succeed, etc.
2) Larger amounts of loan forgiveness should be offered to those that are willing to do jobs we need, e.g. K-12 teaching in public schools, nurses, etc.
3) For political and social reasons, I think student loan forgiveness should be accompanied with an offer of free community college or trade school for anyone that wants it.
4) Universities, especially private universities, have profited handsomely off of the current student loan system. As student debt has piled up, universities have massively expanded the ranks of administrators and created a self-perpetuating bureaucracy that does little of value. Simultaneously, university administrators have systematically under-invested in instruction and turned teaching at the university level into part of the gig economy. A majority of university courses are now taught by temporary, insecure, underpaid labor.
Student debt relief should be accompanied by measures to reform this situation. For example, some government-backed student loans could only be available to students that attend universities where the ratio of money spent on education / research vs administration meets a certain threshold.
I don't know, I think Matt's suggestions have a bit of Brookings-brain going on. Each individual carveout and exception makes sense and probably polls well but too much of it and you have a partial non-refundible tax credit for qualifying child care expenditures incurred in an economically distressed zip code, with a phase in and phase out. No layperson will understand the thing as a whole.
My preferred loan forgiveness plan would be to focus on interest. Set the interest rate on all federal student loans to zero. But do it retrospectively, too: treat all past payments as payments toward the principal and forgive any portion of someone's debt load attributable to interest.*
This would result in a lot of people having the entirety of their debts forgiven (think of the sob stories of debtors who borrowed $15k, have paid back $20k, and still owe $15k). It alleviates a lot of the sensation of a creeping, looming debt load that I think causes a lot of dissatisfaction. But importantly, it's not as readily susceptible to criticism that it's an unfair handout for elites. Everyone pays back every cent of what they borrowed, but the government doesn't make any money off of them. Some people who already paid off their student loans maybe feel a little bitter, but not nearly to the same degree as full-scale debt forgiveness. And you can say it in a sentence: Biden got rid of past, present, and future interest on student loans. But I think it'd be nice to do a blanket $10k (or more, why not, right?) too; it doesn't have to be an either/or.
*I have not researched the statutory authority here but if debt can be forgiven straight up and Trump can suspend interest unilaterally I anticipate that approach this would be lawful.
Disclosures: am lawyer married to doctor, total debt burden presently exceeds half a mil. So I didn't love the professional school carve out ;)
I think you’re underestimating the blowback of what is essentially a welfare program for people who can work from home coming from the same party seen as responsible for putting a lot of poorer service industry workers out of work. The better analogy is probably a corporate tax cut in terms of giveaways to already-fortunate people, and it will be resented (from what I recall, this did not help the GOP in the 2018 midterms).
I feel like there is a significant difference between Trump's farm bailout and student debt forgiveness that could make it politically toxic for Democrats. Specifically that student debt forgiveness plays right into the conservative narratives about Democrats: "Democrats are raising taxes on regular hard working Americans to help people who were irresponsible with their money and/or rich liberal elite college grads." As you point out, the only reason Democrats are focusing on this over other forms of spending is that this can actually get done. However, to the average low information voter, it sure seems like Dems prioritizing young, coastal liberals over the needs of "normal Americans."
My concern is less about the politics. College cost inflation has been an awful disease afflicting America and a one-off debt cancellation is like giving a cancer patient a one time shot of morphine. I guess it’s better than letting them writhe in pain, but shouldn’t we at least be trying to do something about the cancer?
I think that there will be resentment from the same people who support Trump (non-college educated rural whites), a portion of whom the Democratic party needs to win back in the next two years if they want to keep the House and maybe win the Senate. It is not fair, but that is a real cost Democrats will have to pay for passing even a limited and means tested student loan forgiveness. I also have to pick a bone with the comparison to the farmers subsidy; that subsidy was to compensate farmers for the loss they suffered directly because of actions of the US government. But the students took on these loans willingly.
The problem with this topic, student loan forgiveness, is that those pushing the idea are not being honest about their motives.
If the goal of this policy is to help those, mostly poorer people, being crushed by student loan debt; then the obvious solution is to change bankruptcy laws to allow bankruptcy judges to vacate the debt, as they can do for virtually all other types of debt. Why is there so little discussion about the bizarre status of student debt as being untouchable during bankruptcy proceedings?
The reason is that the true motivation for student debt canceling is a first step toward “free” college. Canceling college debt is indistinguishable from college being free.
Now go ahead and agree the pros and cons of free college and if all agree that’s the right thing to do, then there is a certain logic in canceling existing debt in the name of fairness...but let’s be honest about what is trying to be achieved with student loan debt canceling; or at least add bankruptcy reform as a very practical and achievable solution to the problem of people being crushed by student debt.
Not saying anything others in the comment section haven't already but I find the idea of student loan forgiveness offensive. I read it as a bribe to increase youth turnout. I might be unique tho in employing non-college technicians who made a business decisions that college wasn't for them. All this would do is reinforce that the game is rigged against the working class. This issue + M4A cost Bernie my vote in the primaries.
Well everyone below covered what I feel.
I was speaking to my coworker the other day. His daughter is going to University of North Carolina. He saved his whole life to send her there. Last week he applied for a student loan for $20,000K (in her name)
Figured he’s $20,000 richer if they cancel student loans, if not he’ll just pay it back immediately when she graduates. At most he loses fees and interest.
The real problem: what good does canceling student loan one time do?
What happens when the current cohort of students, graduates with a bunch of loans in two years? Four years?
Not only will you have resentment from the people that didn’t go to college, there will be resentment from people that paid off their loans, and resentment from the people who have loans in the future.
The attack ads will be lit.
Show Juan, married with two kids, works is an auto mechanic, gets nothing.
Then show Karen, single, marketing consultant, bullshit degree from some college, from an upper class family, gets $20,000 windfall.
Let’s just say... this has the potential to alienate a lot of people.
Student loan relief should only be done as part of a broader package. And it better include shit for working class people.
The whole subject gets me riled up. It’s like the housing bailout all over again.
I will burn shit! (Just kidding, but I will remember it at election time)
Is it no longer true that a four year degree has a lifetime benefit of $750,000 to $1,000,000? If college degrees have big benefits for the degree holder, it makes sense to me that they pay for it.
If it's not true and there's no lifetime benefit, I think we need to revisit the whole idea of federal student loan programs.
(I anticipate this post will make me even more unpopular than I already am. :-) )
As a well paid lawyer with huge student debt I object on the following grounds:
(1) part of this is generational unfairness. Lawyers have always made high salaries, but I owe 300,000 in debt while people who graduated 20 years before me owed well less than half of that even in inflation adjusted terms
(2) I took on huge debt because I came from a middle class family who could not put me through law school. The people who went with me to law school who don’t have debt are absurdly rich and are only going to be more rich because they make the salary and don’t have the debt
(3) while I make a very good salary, I’m only realistically going to do so for about 5-6 years before I’m kicked out of a big firm by the up-or-out system. That’s not enough time to even get myself in the black
(4) I only am working at this big evil firm because I owe huge amounts of money, and I hate the job and my life. I don’t want to have to do this!
Is the policy you’re talking about a one-time thing? Or is there talk about how to deal with people who take out a loan the day after their debt would have been canceled?
On a purely PR level, this would be a huge boon to the GOP and show what an elitist party the Democrats really are. Most working class people don't even want to go to college for a variety of reasons. Even your dumb ethnic studies major graduate is likely miles ahead on writing skills, reading, and future income potential than her peers who only have a shitty public school high school diploma and yet she gets "free" and the peers pay for it?
I don't see the individual tax implications of debt relief income being discussed much. It seems like the biggest actual problem with this plan. Are we in danger of an Oprah effect, giving folks tax liability they can't afford from phantom income they can't spend? Does the Biden admin's authority to forgive debt extend to its treatment as income by the IRS?
I just find it hard to accept that student loan forgiveness won’t cost anyone else anything. It seems like it will cost the amount of the forgiven loans - it’s just a straight transfer to people with debt from people without.
I know the bonds are negative interest rates, but the government still does have to pay them back at some point (just less than they borrowed).
I don’t really understand why - given your argument that basically any way for the government to spend money is good - you don’t endorse canceling all student debt. What’s bad about giving a bunch of money to rich people, if government spending is better-than-free right now? What’s the limiting principle?
Also, I thought the arguments about not means testing programs in One Billion Americans were persuasive and they (mostly) apply to this. You could just keep the forgiveness to fairly small amounts per household and it would be less regressive.