Stories like Chris', which have been reported in the media for some decades when loan reform comes up, are truly compelling. And they tend to bring out the same set of screamers and crybabies who protest someone ELSE getting a toy. ("What?? MY TAX MONEY going to pay for x, y, z??") These people have no problem when literal trillions ar…
Stories like Chris', which have been reported in the media for some decades when loan reform comes up, are truly compelling. And they tend to bring out the same set of screamers and crybabies who protest someone ELSE getting a toy. ("What?? MY TAX MONEY going to pay for x, y, z??") These people have no problem when literal trillions are wasted on baseless wars, and ignore the fact that most all people who pay student loans are also paying taxes. So Chris gets to pay for the military industrial complex for wars that he didn't agree to, but could not use his tax contribution to pay for his education, which is basically how the pre-Reagan era Baby Boom went to college and graduate school. Chris gets to pay interest on the national debt since then, which mostly was racked up on giveaway tax cuts to the extremely wealthy. They got the tax cut, Chris got the bill.
In fact, many of the high balance pre-seniors are also people who've paid a lifetime of income and payroll taxes. It isn't that the student loan borrowers "didn't pay". It's that, for their generation, the tax money wasn't allowed to be used for THEM, like it was for the previous generation.
("Hey, me here in my blue-collar job, I had to pay taxes too!" Well, guess what, you had less competition starting out because the Chrises of the world were sitting at a college desk, not bidding against your price for labor.)
As to a quarter-million student loan balance, though. It wasn't that Congress in the Reagan Administration took rates from 7% to 9%(!) on the way to 10% in the 1980s. It sounds like what made it a big number were automatic penalties imposed in the event of a default. These penalties bore no proportion to the actual cost to resolve the default. Usually, that was a phone call to the appropriate department and the borrower put in a percentage-of-income program, making payments for 12 months to cure the default. It doesn't cost $25,000 in penalties to make that happen.
The Department of Education has offered percentage-of-income repayment since 1994. Loans were to be cancelled starting in 2019 (25 years). I doubt there has even been one cancellation under this "ICR" scheme (income-contingent repayment). Maybe because the percent was too high, but more likely, because no one knew the option was there, because the servicers had NO incentive to let it be known. It was buried in the loan contract.
It's unlikely that President Biden is going to simply cancel all $1.6 trillion in federal student debt. It's also unlikely that this money is ever going to be "repaid" (meaning, it has already been paid in tax money that was diverted to the needless trillions in wars, the borrowing for the wealthy's tax cuts, etc.) DeVos, billionaire grifter like Trump, had Deloitte or one of the biggies do a study which showed that at current rates, $500 billion of the money will be cancelled at death. Per the loan contracts. That number is only going to go up.
The better approach to reform is to revisit Obama's "REPAYE" income-based plan, and put the contribution rate to more like 7% of income above an exemption rate like $30,000, with a full-stop cancellation at 15 or 20 years, and five more for graduate school. Any undergraduate balance from 2001 or before, and any graduate balance from 1996 (25 years ago) gets cancelled. No more goofy forbearance that wracks up the debt, or deferments with so many terms and conditions that they're useless. The hard-stop cancellation after a quarter century also makes it walk-the-walk. The Democrats have a hard time getting voters to believe their song and dance anymore about delivering for them.
Costs can be borne by restoring pre-Reagan tax rates on the very highest earners, including capital gains that they can't weasel out of by fudging basis like they used to (and how college for the richie riches got paid in the 1980s --- sell stock, lie about the gain).
Thanks very much. I am made more accurate. I just knew it's any one of those large ones that loves to take federal contracts to write a report about how we should be shocked (shocked!) that other people get federal money.
If McKinsey makes a mistake, though, they don't have to pay it back.
I agree that the less cumbersome solution is just to cancel the debt. And the colleges just lower their prices next year and take it out of those huge endowments. But that won't happen. Student debt is not creating "another Great Depression". But people having to pay any more than, say, 7% of discretionary income is a drag on the economy. (It's like a surtax that is just sucking up demand.) A couple percent of income towards these debts is fair, because tax rates in the 1960s and 1970s were maybe 5 to 7 percent more on the margin than today. So the people who got it free in those days, this is the tax they paid. And we make it equal by matching the overall tax rate (income plus student loan surcharge) to the Treasury.
Stories like Chris', which have been reported in the media for some decades when loan reform comes up, are truly compelling. And they tend to bring out the same set of screamers and crybabies who protest someone ELSE getting a toy. ("What?? MY TAX MONEY going to pay for x, y, z??") These people have no problem when literal trillions are wasted on baseless wars, and ignore the fact that most all people who pay student loans are also paying taxes. So Chris gets to pay for the military industrial complex for wars that he didn't agree to, but could not use his tax contribution to pay for his education, which is basically how the pre-Reagan era Baby Boom went to college and graduate school. Chris gets to pay interest on the national debt since then, which mostly was racked up on giveaway tax cuts to the extremely wealthy. They got the tax cut, Chris got the bill.
In fact, many of the high balance pre-seniors are also people who've paid a lifetime of income and payroll taxes. It isn't that the student loan borrowers "didn't pay". It's that, for their generation, the tax money wasn't allowed to be used for THEM, like it was for the previous generation.
("Hey, me here in my blue-collar job, I had to pay taxes too!" Well, guess what, you had less competition starting out because the Chrises of the world were sitting at a college desk, not bidding against your price for labor.)
As to a quarter-million student loan balance, though. It wasn't that Congress in the Reagan Administration took rates from 7% to 9%(!) on the way to 10% in the 1980s. It sounds like what made it a big number were automatic penalties imposed in the event of a default. These penalties bore no proportion to the actual cost to resolve the default. Usually, that was a phone call to the appropriate department and the borrower put in a percentage-of-income program, making payments for 12 months to cure the default. It doesn't cost $25,000 in penalties to make that happen.
The Department of Education has offered percentage-of-income repayment since 1994. Loans were to be cancelled starting in 2019 (25 years). I doubt there has even been one cancellation under this "ICR" scheme (income-contingent repayment). Maybe because the percent was too high, but more likely, because no one knew the option was there, because the servicers had NO incentive to let it be known. It was buried in the loan contract.
It's unlikely that President Biden is going to simply cancel all $1.6 trillion in federal student debt. It's also unlikely that this money is ever going to be "repaid" (meaning, it has already been paid in tax money that was diverted to the needless trillions in wars, the borrowing for the wealthy's tax cuts, etc.) DeVos, billionaire grifter like Trump, had Deloitte or one of the biggies do a study which showed that at current rates, $500 billion of the money will be cancelled at death. Per the loan contracts. That number is only going to go up.
The better approach to reform is to revisit Obama's "REPAYE" income-based plan, and put the contribution rate to more like 7% of income above an exemption rate like $30,000, with a full-stop cancellation at 15 or 20 years, and five more for graduate school. Any undergraduate balance from 2001 or before, and any graduate balance from 1996 (25 years ago) gets cancelled. No more goofy forbearance that wracks up the debt, or deferments with so many terms and conditions that they're useless. The hard-stop cancellation after a quarter century also makes it walk-the-walk. The Democrats have a hard time getting voters to believe their song and dance anymore about delivering for them.
Costs can be borne by restoring pre-Reagan tax rates on the very highest earners, including capital gains that they can't weasel out of by fudging basis like they used to (and how college for the richie riches got paid in the 1980s --- sell stock, lie about the gain).
Frederick--"McKinsey" (the sister brother uncle cousin of Wall Street) did the study.
Thanks very much. I am made more accurate. I just knew it's any one of those large ones that loves to take federal contracts to write a report about how we should be shocked (shocked!) that other people get federal money.
If McKinsey makes a mistake, though, they don't have to pay it back.
Better and simpler to just cancel the debt, which would also be a huge, and much-needed, and very populist stimulus to the economy.
You do realize we're staring down another Great Depression, right?
I agree that the less cumbersome solution is just to cancel the debt. And the colleges just lower their prices next year and take it out of those huge endowments. But that won't happen. Student debt is not creating "another Great Depression". But people having to pay any more than, say, 7% of discretionary income is a drag on the economy. (It's like a surtax that is just sucking up demand.) A couple percent of income towards these debts is fair, because tax rates in the 1960s and 1970s were maybe 5 to 7 percent more on the margin than today. So the people who got it free in those days, this is the tax they paid. And we make it equal by matching the overall tax rate (income plus student loan surcharge) to the Treasury.