Student Loan Forgiveness: A Bad Idea Disguised

Russell Michaels

Russell is inside his own mind, a comfortable yet silly place. He is also on Twitter.

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37 Responses

  1. Dark Matter says:

    A lot of that debt is for medical schools (doctors, nurses, vets, and dentists) and lawyers. They get a lot of debt because they’re going to have very high incomes.Report

  2. Patrick says:

    I am begging literally everybody to stop writing about this without actually reading more than the four numbers that get shared around whatever their ideological circle is.Report

    • Saul Degraw in reply to Patrick says:

      Good luckReport

      • Patrick in reply to Saul Degraw says:

        Literally since Bernie brought this up in 2015 I’ve been complaining that nobody has actually understood the scope of this problem and mostly everyone who has been talking about it elides over a whole bunch of stuff that makes an *enormous* difference in both the scope and size of the problem to misrepresent what they’re actually proposing to do, and people keep doing it.

        There are three chunks of student loan debt: federally subsidized Stafford Loans, un-subsidized Stafford Loans, and private institutional loans. Who gets how much of what and how much of it they still owe and how much they have to pay are spread over a scattergram that is so spread out it makes averages useless for impact analysis.Report

  3. InMD says:

    I agree on the basic concept of no non-means tested, blanket forgiveness without reform first but….

    I graduated with zero student loan debt, largely thanks to my parents

    I’d have snipped the boot straps portion of this piece given the above.Report

  4. Saul Degraw says:

    At this point, is there anyone whose opinion has not been made on this subject? I feel like everyone has their opinions drawn in the sand and all the “debate” creates more heat than light.Report

  5. Jaybird says:

    There was a funny tweet that went around the other day:

    If the tweet gets deleted, it said:

    I beat cancer. If they suddenly find a cure for cancer now, I’m gonna be so mad!

    This tweet is about student loans.

    As analogies for the people opposing student loans go, it’s okay, I guess.

    I’m also 100% down with comparing “this degree isn’t worth what I paid for it!” with cancer as well.

    But maybe we shouldn’t be giving so many people cancer in the first place?Report

    • Pinky in reply to Jaybird says:

      That tweet would make sense from a smoker.Report

    • Marchmaine in reply to Jaybird says:

      I guess the weird thing to me about that tweet and all the folks embracing the logic is that we didn’t ‘cure’ anything… everyone still has cancer, they just gave it to their kids. And worse, since we didn’t actually cure it, we encouraged the kids to start smoking and and the cigarette makers to change their formulations to make them more addictive and as dangerous as they need to be.

      And worse still, an entirely new generation will grow up and go to college to learn how to make tortured metaphors.Report

    • j r in reply to Jaybird says:

      My wife and I paid off about $200K in grad school loans and I could care less if the government waves its magic wand tomorrow and made every bit of student loan debt in the land disappear. Yes, it’s bad policy, but we do bad policy every day. I wouldn’t lose a moment of sleep feeling like I’d gotten a raw deal. We did the things that we thought were best for us and it’s all turned out pretty good so far. I wish nothing but the best for everyone still dealing with school debt.

      That said, I do have two minor beefs with this whole student loan forgiveness movement. One is that it’s an obviously regressive wealth transfer to a relatively well-off and politically important group of people. This is fine. Democracy is about advocating on your own behalf. Just stop telling me that this is some sort of progressive, social justice issue.

      And two, stop telling me that there is a student loan crisis while also pushing back against anyone who suggests curtailing your discretionary spending or developing some budgeting and prioritization skills. No, it’s not a crisis if you’re still buying $5 lattes, avocado toast and trips to Tulum to snap pictures on your Tikety Toks and Instant Grams. Now, get off my lawn!

      Sorry to play the Dutch Uncle, but politics is not magic. You have to find a way to make do in this world and waiting around for the government to bail you out is not necessarily the best way to do that, unless you happen to be a big bank or an oil company or the auto industry or the defense industry…Report

      • Jaybird in reply to j r says:

        Hey, I am *MORE* than happy enough to say “We need to cure cancer!”

        I’m just thinking that we should *ALSO* say “Quit smoking.”

        If we have a massive problem with people purchasing degrees that are not worth the money they’re paying, then we need to have those degrees come with a warning on the side of the pack (at the very least).

        Make it so that they can’t go to bars anymore.Report

      • Michael Cain in reply to j r says:

        Your third paragraph got me to smile, remembering an evening when I had started back to grad school in a PhD economics track. One of the other students found it astounding that I paid $3 to park my car on campus for an evening class, rather than parking for free some distance away and riding the free bus. I pointed at the Starbucks cup in her hand and asked, “Second today?” “Third,” she admitted. “What part of the lecture on revealed preferences did you not understand?”Report

      • Philip H in reply to j r says:

        You have to find a way to make do in this world and waiting around for the government to bail you out is not necessarily the best way to do that, unless you happen to be a big bank or an oil company or the auto industry or the defense industry…

        As our current tax policies heavily favor these folks, I have no issues forgiving student loans. Nada.Report

        • j r in reply to Philip H says:

          No. Our current tax policies favor any entity willing to take a liability off the public balance sheet, which is how we got into this student loan mess in the first place.

          I understand that the political economy of this issue is a little but counterintuitive, but it’s not exactly quantum mechanics. Politicians want to be seen as supporting higher education but they don’t want to raise taxes or change spending priorities enough to pay for it. So they subsidize a loan market, which gives the bank a near-guaranteed 6% return. Problem solved. Yay! Everybody loses.Report

          • Brandon Berg in reply to j r says:

            But government does heavily subsidize higher education, not only through direct subsidies to universities and grants for low-income students, but also through subsidized loans to undergraduates with income-based repayment (graduate loans, on the other hand, are generally profitable for the government). Due to heavy subsidies, the price students are actually required to pay for undergrad degrees is quite reasonable.

            AFAIK, the federal government no longer guarantees private student loans. Since 2010, all federal loans have been own issued and held by the federal government itself.Report

          • Brandon Berg in reply to j r says:

            The government no longer guarantees private student loans. That program was ended in 2010, and all new federal loans since then have been issued and held by the federal government.

            I had an extremely difficult time getting this comment to post, and I had to cut out a whole paragraph about how the government already does subsidize the hell out of college in central and undergrad in particular.

            I’m not sure what triggered the spam filter.Report

        • Brandon Berg in reply to Philip H says:

          Myth: See above.

          Reality: The US tax system heavily favors low-income households, whose tax liability is a mere fraction of the cost of the government services they consume. Conversely, it heavily disfavors high-income households, which pay much more in taxes than it costs the government to service them. Households with high savings rates get a particularly bad deal due to the compounding effect of taxes on investment income.Report

          • Philip H in reply to Brandon Berg says:

            So you’d prefer we tax the poor MORE? So they pay directly for government services used? Wow. Its audacious as a view point, but no ordinary not heavily online person would likely agree with it. Its also not really true either. Middle income and lower Americans pay progressive taxes on wages earned. Below a certain income level we don’t tax them because it would further impoverish them, meaning they’d need more services.

            Elon Musk and his ilk pay lower tax rates on investment income – but only when they sell it and there’s a capitol gain. He lives off borrowed money that uses his investments as collateral. And so while he does pay more in absolute dollars then a poorer person, he’s also able to defer all sorts of tax burden. To say nothing of all the foregone tax receipts that are given to corporations and rich investor individuals based on significant misperceptions about their worth economically.

            If Elon Musk “deserves” a potion of the 2017 Tax cuts, then ordinary Americans certainly deserve relief from burdensome student debt.Report

            • InMD in reply to Philip H says:

              I think the basic issue is that looking at this in terms of ‘takers’ versus ‘givers’ really doesn’t make any sense at the scales involved nor the practical issues on the ground.Report

              • j r in reply to InMD says:

                InMD is right. Trying to figure out the net tax payers and net beneficiaries of the tax system would require assigning values to a whole bunch of subjective factors.

                What’s the value of the US’ rule of law protections relative to other places? What’s the value of social transfers that are run for the benefit of the bureaucratic class or that actively harm you?

                And even if you could answer those questions and assign the relevant values, do any of you feel like you have enough of a grasp on the federal tax code to say with certainty who is making out and who is getting taken? I don’t. And public finance is what I do for a living. Even accountants and tax attorneys are only going to have real insight into small pieces of the system.

                What we have in America is a really complicated system of cross-subsidies and negotiated tax benefits. And the whole point of that system is to make it near impossible to figure out who is paying for what, because politicians find that helpful in justifying whatever they want at any given moment.Report

              • Philip H in reply to j r says:

                What we have in America is a really complicated system of cross-subsidies and negotiated tax benefits. And the whole point of that system is to make it near impossible to figure out who is paying for what, because politicians find that helpful in justifying whatever they want at any given moment.

                Very, sadly, true.

                That said, if we can “afford” to give large corporations and the ultra wealthy $1.7 Trillion in foregone federal revenue which largely got pulled out of the economy through stock buybacks, we can “afford” to forgive student loans across the board in the same amount – the vast majority of which will go into a variety of economic activities.

                This isn’t hard.Report

              • Dark Matter in reply to Philip H says:

                if we can “afford” to give large corporations and the ultra wealthy $1.7 Trillion in foregone federal revenue which largely got pulled out of the economy through stock buybacks, we can “afford” to forgive student loans across the board in the same amount

                So if I own two houses I can afford to buy another two?

                Oh and it must be money well spent?Report

              • Philip H in reply to Dark Matter says:

                If you own two houses, and buy two more, but get refunded the full purchase price of the second two and the property taxes for them in perpetuity, which you then take out of economic circulation because you can, I don’t really see getting huffy about me wanting the money back for my second two houses when I’m gonna spend that money and keep it in the economy where it generates additional revenue for businesses and taxes for services I use.Report

              • Dark Matter in reply to Philip H says:

                Word salad.Report

            • Dark Matter in reply to Philip H says:

              Elon Musk and his ilk…

              Elon and his ilk don’t exist at the level of finance we’re talking about. They don’t have enough money.

              There is an argument for outlawing borrowing money by using investments as collateral. Doing that helps “fairness” somewhat (whatever that means) but won’t move the needle for either inequality nor the US deficit.Report

              • Philip H in reply to Dark Matter says:

                Elon and his ilk don’t exist at the level of finance we’re talking about.

                Only because we keep pretending that the investment revenue he receives as compensation – which he then borrows against to meet his living expenses – is somehow so different as “money” that it needn’t be taxed in a way that wage earners are taxed. That’s part of the folley here, and frankly if he were taxed more proportionally – if businesses were taxed more proportionally that would effect the debt and deficit.Report

              • Dark Matter in reply to Philip H says:

                that would effect the debt and deficit.

                This is wishful thinking, not math.

                The math of it says Musk is one guy who spends tens of millions of dollars a year (thus has that as an income) while the middle class earns Trillions.

                We have 124 million households and their average income rounds to $70k. So America has something like $8.7 Trillion in income that we tax.

                How many people do we have like Musk? Do we even have 10? If we have 100 (we don’t) and each spends $10 million that we reclassify as income, that’s an extra $1 Billion that we’d have to tax for income taxes.

                That 8.7 changes to 8.701.

                If we want to assume Must and his 99 fellows each spend $100 million a year, then that’s 8.71. Still a rounding error and I’m making awe inspiringly bad handwaves in your favor.Report