A story, in three parts. First, what they’ve done going backwards, and what it lays the rhetorical groundwork to do in the future to help make things worse. Second, what they’re doing going forwards to actively make things worse. Third, a bird’s eye view of how much worse things were made.
"Democracy survives until the public realizes it can vote itself money from the public purse in unlimited quantities."
This highlights the need for an independent central bank which is extremely vigilant in fighting inflation. It becomes the last check on government spending. If politicians (and the electorate) learn that more spending (at a time of high inflation) results almost immediately in higher interest rates they might start thinking twice.
This all makes my blood boil. If I can look back to the 'root cause', "How does the President have the power to do this?" Is it because the congress has ceded most of it's power to the prez.? My solution to many things political is to have congress take back it's power... not that I see that happening any time soon.
“If and when Republicans find a way to steal (ahem, ‘transfer money’) from blue voters to red voters, objections will be that much easier to laugh off.“
I was surprised to see no mention of the SALT cap here, another recent policy change with disparate impact along political lines. It is different in every other way; rather than benefitting the red base by raiding the public purse, it punished blue state high earners in order to *augment* the public purse. But still, it was another recent policy reform with obvious political valence, and perhaps that’s part of why Democrats feel entitled to “laugh off” critics of partisan redistribution here.
“One possibility is that they will do this by going after higher education.”
Contingent on how they go about it, mightn’t this be a good thing? I was struck by the vehemence of your assertions that college education is broadly a cost, not a benefit, and your characterization of the system as broadly providing a positional good. I agree entirely, which is why I am favorably disposed to certain kinds of taking a wrecking ball to the edifice. In the hypothetical world where you have their ear, what should hypothetical Republican reformers make sure to clear away, and what would you tell them to be careful to leave intact?
Reading from the UK, I'm mostly bemused by this article. Your arguments are usually very well made and easy to follow, but I found this one to be bogged down in the sort of party political stuff you usually do well to avoid. It is clear that you hate the policy, but this seemed more like a pure polemic than your usual style of cold analysis interspersed with the odd strong opinion.
Take for example PPP. The point being made in the White House tweets is a simple one. Marjorie Taylor Greene had no qualms being on the receiving end of government spending which transferred wealth to Marjorie Taylor Greene. But she opposes a transfer of wealth to graduates. The technicalities of the transfers of wealth don't matter to most people, but the fact both transfers are in the form of forgiven loans helps the political point land better. In truth though, this is just the standard left-wing claim that right-wing parties transfer wealth to the rich at the expense of 'normal people'. Getting bogged down in arguments like 'everyone knew PPP loans were a grant, so the two cannot be equated' seems to me like a case of missing the wood for the trees. I'd be surprised if this section of the discussion changed a single person's opinion.
Similarly, while I think it's not unreasonable to argue this policy is cynically stealing from Republican voters to give money to Democrats, it seems remiss not to mention any alternative interpretation. Perhaps things are different in the US, but in the UK, intergenerational wealth inequality is a significant issue, and young adults today are predicted to be less well off than their parents. The fact that young people take on a mountain of debt in the service of a status game is part of this. In the absence of the sort of majority required to pass transformational legislation, it seems to me that the debt forgiveness policy's main function is to act as a clear signal to younger, educated voters that the Democratic party is standing up for their interests, in the hope of winning power in the future.
I'm quite disappointed that the article doesn't discuss this, or attempt to give any motivation for the policy other than pure bribery. Having said all that, I did still get something from this, as I hadn't heard of Income Sharing Agreements before, and at first glance they seem like a great idea. If you have more thoughts on that I think it would make a very interesting article.
P.S. Sorry if this is overly negative, I still think you're great!
"This indeed is a great deal for the student who pays nothing and it’s a great deal for the law school which gets 200k more revenue immediately in return for 150k of payments paid out over the following 10 years. Win-win! Except for the taxpayer of course."
I have the impression that loan forgiveness in many cases involves a significant tax hit to the former student. I don't know if this round of loan forgiveness will or won't, but there are cases of large student loans being forgiven and the former student now suddenly has to pay income taxes on $150K or whatever. I don't know all the details, though; I just know it can be a gotcha.
Edited to add: This article describes what I'm talking about. This orthodontist wound up with $1M in student debt, but when it's forgiven, he'll owe the taxes as ordinary income.
One simple fix that would eliminate ~90% of the "crushing student loan" anecdotes would be to eliminate the Grad PLUS Loan program, or at least dramatically tighten eligibility to only cover programs where graduates are statistically likely to earn enough to justify the loans.
Almost 100% of the coverage of "the student loan crisis" profiles students who took out large loans to pursue masters programs with low or negative expected value. There is 0 reason for the government to subsidize this, and cutting off Grad PLUS funds would help halt the escalation of the master's degree expectation that has crept across our entire labor market.
My unpopular opinion is that the federal student loan situation for undergraduate was mostly fine. The relatively low annual and lifetime limits combined with the already existing IDR programs made it difficult for anyone to carry a truly problematic burden from federal undergraduate loans alone. Parents could (and did) get themselves in trouble with Parent PLUS loans, but I'm frankly much less sympathetic to that case - we're not talking about 18-year-olds, and those same parents could similarly get themselves in trouble with a loan for an F-150.
Won’t those who have outstanding student loans which don’t qualify for “forgiveness” right now simply stall on paying anything in the reasonable belief that once something like this is put in place, the eligibility criteria will be weakened? Why pay what you owe now if you won’t have to pay if you just wait a while?
Instead of student loans which must be repaid, the educational institution gets a percentage of the student's post-graduation earnings. This would be negotiable and could be replaced in whole or in part by paying normal tuition.
If you think about it, loans have to be repaid anyway, and this way the educational institution has a big incentive to prepare students for the highest paying jobs in their field. The school would also invest in finding jobs for graduates. There would also be a big financial pressure on schools to move away from economically useless degrees.
Poor students would be better off than they are now because the school wouldn't be able to exploit their inexperience by selling them a trash degree. Better off students wouldn't be forced to take high-paying jobs to make enormous student loan payments. The school would get a percentage of income, whatever that turned out to be.
This way the school is taking the risk, not the students or their families. Would colleges become more selective about who they admit? Of course. That would be a good thing! Spending $50- 100k on a degree to get a job which earns $50k a year is not a good return. Most students in that situation would be better off just working for four years and gaining experience and not incurring the debt.
Full disclosure: I got a cheap 4 year degree from a no-name state college and the GI Bill paid for all of it. While the degree has gotten my foot in the door for a few jobs, for the most part it hasn't been necessary. I am very grateful I didn't blow a lot of money on it.
There are soooooo many jobs out there that don't require an expensive degree. Our society gives status to jobs which require more education, even if the pay is bad.
> Make loans available, require 10-20% of gross to be paid towards the loan each year, and after 10 years, the university pays whatever balance is left.
Tying tuition directly to expected income seems like a pretty good way to institute market-responsive price controls.
This is far fewer schools than listed in the linked tweet, but I skimmed the report on the one beauty school in the list and learned that the ED found them to have misrepresented the kind of instruction provided, failed to provide instruction required by regulations, and would sometimes fail to provide any instruction at all for weeks at a time.
I wonder if that's typical of the beauty schools on the list.
My curiosity was piqued because if the metric is based on something like post-education success, then you've got a huge confound in the kind of population the school is serving. The people that enroll in beauty schools advertised on television just aren't the best decision-makers, and even when they make all the right decisions, aren't going to be earning all that much as a hair stylist.
Why can't the solution be to steal back from the educational institutions? From what I understand, higher education in the US is basically a scam. Rather ridiculous one, given that Internet exists. Like, if information was scarce, education costing a lot would make sense. _It's not._
"Democracy survives until the public realizes it can vote itself money from the public purse in unlimited quantities."
This highlights the need for an independent central bank which is extremely vigilant in fighting inflation. It becomes the last check on government spending. If politicians (and the electorate) learn that more spending (at a time of high inflation) results almost immediately in higher interest rates they might start thinking twice.
This all makes my blood boil. If I can look back to the 'root cause', "How does the President have the power to do this?" Is it because the congress has ceded most of it's power to the prez.? My solution to many things political is to have congress take back it's power... not that I see that happening any time soon.
“If and when Republicans find a way to steal (ahem, ‘transfer money’) from blue voters to red voters, objections will be that much easier to laugh off.“
I was surprised to see no mention of the SALT cap here, another recent policy change with disparate impact along political lines. It is different in every other way; rather than benefitting the red base by raiding the public purse, it punished blue state high earners in order to *augment* the public purse. But still, it was another recent policy reform with obvious political valence, and perhaps that’s part of why Democrats feel entitled to “laugh off” critics of partisan redistribution here.
“One possibility is that they will do this by going after higher education.”
Contingent on how they go about it, mightn’t this be a good thing? I was struck by the vehemence of your assertions that college education is broadly a cost, not a benefit, and your characterization of the system as broadly providing a positional good. I agree entirely, which is why I am favorably disposed to certain kinds of taking a wrecking ball to the edifice. In the hypothetical world where you have their ear, what should hypothetical Republican reformers make sure to clear away, and what would you tell them to be careful to leave intact?
Reading from the UK, I'm mostly bemused by this article. Your arguments are usually very well made and easy to follow, but I found this one to be bogged down in the sort of party political stuff you usually do well to avoid. It is clear that you hate the policy, but this seemed more like a pure polemic than your usual style of cold analysis interspersed with the odd strong opinion.
Take for example PPP. The point being made in the White House tweets is a simple one. Marjorie Taylor Greene had no qualms being on the receiving end of government spending which transferred wealth to Marjorie Taylor Greene. But she opposes a transfer of wealth to graduates. The technicalities of the transfers of wealth don't matter to most people, but the fact both transfers are in the form of forgiven loans helps the political point land better. In truth though, this is just the standard left-wing claim that right-wing parties transfer wealth to the rich at the expense of 'normal people'. Getting bogged down in arguments like 'everyone knew PPP loans were a grant, so the two cannot be equated' seems to me like a case of missing the wood for the trees. I'd be surprised if this section of the discussion changed a single person's opinion.
Similarly, while I think it's not unreasonable to argue this policy is cynically stealing from Republican voters to give money to Democrats, it seems remiss not to mention any alternative interpretation. Perhaps things are different in the US, but in the UK, intergenerational wealth inequality is a significant issue, and young adults today are predicted to be less well off than their parents. The fact that young people take on a mountain of debt in the service of a status game is part of this. In the absence of the sort of majority required to pass transformational legislation, it seems to me that the debt forgiveness policy's main function is to act as a clear signal to younger, educated voters that the Democratic party is standing up for their interests, in the hope of winning power in the future.
I'm quite disappointed that the article doesn't discuss this, or attempt to give any motivation for the policy other than pure bribery. Having said all that, I did still get something from this, as I hadn't heard of Income Sharing Agreements before, and at first glance they seem like a great idea. If you have more thoughts on that I think it would make a very interesting article.
P.S. Sorry if this is overly negative, I still think you're great!
Do the annual+lifetime caps on federal student loans at least limit the magnitude of the damage here?
"This indeed is a great deal for the student who pays nothing and it’s a great deal for the law school which gets 200k more revenue immediately in return for 150k of payments paid out over the following 10 years. Win-win! Except for the taxpayer of course."
I have the impression that loan forgiveness in many cases involves a significant tax hit to the former student. I don't know if this round of loan forgiveness will or won't, but there are cases of large student loans being forgiven and the former student now suddenly has to pay income taxes on $150K or whatever. I don't know all the details, though; I just know it can be a gotcha.
Edited to add: This article describes what I'm talking about. This orthodontist wound up with $1M in student debt, but when it's forgiven, he'll owe the taxes as ordinary income.
https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975
Edited again (I need to learn to read ahead): https://www.cnbc.com/select/biden-student-loan-forgiveness-and-taxes/
Looks like no federal tax, but state tax might be due.
Allow student loan debt to be discharged in bankruptcy.
Fixed.
One simple fix that would eliminate ~90% of the "crushing student loan" anecdotes would be to eliminate the Grad PLUS Loan program, or at least dramatically tighten eligibility to only cover programs where graduates are statistically likely to earn enough to justify the loans.
Almost 100% of the coverage of "the student loan crisis" profiles students who took out large loans to pursue masters programs with low or negative expected value. There is 0 reason for the government to subsidize this, and cutting off Grad PLUS funds would help halt the escalation of the master's degree expectation that has crept across our entire labor market.
My unpopular opinion is that the federal student loan situation for undergraduate was mostly fine. The relatively low annual and lifetime limits combined with the already existing IDR programs made it difficult for anyone to carry a truly problematic burden from federal undergraduate loans alone. Parents could (and did) get themselves in trouble with Parent PLUS loans, but I'm frankly much less sympathetic to that case - we're not talking about 18-year-olds, and those same parents could similarly get themselves in trouble with a loan for an F-150.
Won’t those who have outstanding student loans which don’t qualify for “forgiveness” right now simply stall on paying anything in the reasonable belief that once something like this is put in place, the eligibility criteria will be weakened? Why pay what you owe now if you won’t have to pay if you just wait a while?
My other idea:
Instead of student loans which must be repaid, the educational institution gets a percentage of the student's post-graduation earnings. This would be negotiable and could be replaced in whole or in part by paying normal tuition.
If you think about it, loans have to be repaid anyway, and this way the educational institution has a big incentive to prepare students for the highest paying jobs in their field. The school would also invest in finding jobs for graduates. There would also be a big financial pressure on schools to move away from economically useless degrees.
Poor students would be better off than they are now because the school wouldn't be able to exploit their inexperience by selling them a trash degree. Better off students wouldn't be forced to take high-paying jobs to make enormous student loan payments. The school would get a percentage of income, whatever that turned out to be.
This way the school is taking the risk, not the students or their families. Would colleges become more selective about who they admit? Of course. That would be a good thing! Spending $50- 100k on a degree to get a job which earns $50k a year is not a good return. Most students in that situation would be better off just working for four years and gaining experience and not incurring the debt.
Something to think about!
Full disclosure: I got a cheap 4 year degree from a no-name state college and the GI Bill paid for all of it. While the degree has gotten my foot in the door for a few jobs, for the most part it hasn't been necessary. I am very grateful I didn't blow a lot of money on it.
There are soooooo many jobs out there that don't require an expensive degree. Our society gives status to jobs which require more education, even if the pay is bad.
An MR commenter (https://marginalrevolution.com/marginalrevolution/2022/08/the-student-loan-giveaway-its-much-bigger-than-you-think.html?commentID=160485679) made a suggestion I found very intriguing:
> Make loans available, require 10-20% of gross to be paid towards the loan each year, and after 10 years, the university pays whatever balance is left.
Tying tuition directly to expected income seems like a pretty good way to institute market-responsive price controls.
I'm looking at the list of schools for which loans will be forgiven completely and seeing a lot of beauty schools.
This made me wonder what would land a school on this list. I was able to find this: https://studentaid.gov/announcements-events/borrower-defense-update/findings
This is far fewer schools than listed in the linked tweet, but I skimmed the report on the one beauty school in the list and learned that the ED found them to have misrepresented the kind of instruction provided, failed to provide instruction required by regulations, and would sometimes fail to provide any instruction at all for weeks at a time.
I wonder if that's typical of the beauty schools on the list.
My curiosity was piqued because if the metric is based on something like post-education success, then you've got a huge confound in the kind of population the school is serving. The people that enroll in beauty schools advertised on television just aren't the best decision-makers, and even when they make all the right decisions, aren't going to be earning all that much as a hair stylist.
Why can't the solution be to steal back from the educational institutions? From what I understand, higher education in the US is basically a scam. Rather ridiculous one, given that Internet exists. Like, if information was scarce, education costing a lot would make sense. _It's not._
https://www.conradbastable.com/essays/the-uncharity-of-college-the-big-business-nobody-understands