May 2, 2022

Forgiving student debt.

Forgiving student debt.

Biden says a plan is imminent.

I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 13 minutes.

We are diving into the student debt debate. Plus, a question about a new law in California.

Photo: Tom Woodward / Flickr
Photo: Tom Woodward / Flickr

Quick hits.

  1. House Speaker Nancy Pelosi (D-CA) met with Ukraine's President Volodymyr Zelensky, becoming the highest-ranking American to visit Ukraine since the start of the war. (The visit)
  2. President Biden's approval rating is still underwater, but has ticked up slightly in the latest Washington Post-ABC News poll. (The numbers)
  3. Arkansas Gov. Asa Hutchinson (R) said he's considering a run for president, regardless of whether former President Trump jumps into the race or not. (The candidacy)
  4. The NASDAQ fell 13.3% in April, the worst single month fall since October of 2008. The S&P 500 fell 8.8%, its worst month since March of 2020. (The selloff)
  5. More than a dozen states hold primary elections this month as the 2022 midterm season kicks off. (The races)

Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.


Today's topic.

Student debt forgiveness. President Joe Biden is reportedly nearing a decision on how to handle forgiving student debt for borrowers, a policy he ran on in the 2020 election. Since taking office, Biden has repeatedly extended the Covid-era moratorium on student debt payments, but now his administration says it is making a decision on a permanent fix for student debt. Via The Washington Post:

The administration is considering various ways to forgive some student loan debt through executive action. In recent weeks, senior Biden aides have examined limiting the relief to people who earned less than either $125,000 or $150,000 as individual filers the previous year, the people said. That plan would set the threshold at around $250,000 or $300,000 for couples who file their taxes jointly, the people said. No final decisions have been made, and the people familiar with the matter stressed that planning was fluid and subject to change.

Last week, Biden told reporters that he would forgive less than $50,000 of debt per student, and in conversations with other Democrats has said the administration is looking at cutting at least $10,000 of debt per qualifying borrower. That plan, along with the threshold for borrowers (earning less than $125,000 or $150,000 per year) is a similar plan to the one he campaigned on. The administration is also considering a plan that would only forgive debt for undergraduate degrees, rather than including borrowers who went to graduate school.

For now, the plan remains unclear, and the administration's path forward looks to be fluid, though Biden has said he hopes to have a final decision in the next couple of weeks. Unlike many other policy priorities, Biden could make significant headway on student loans with executive action alone.

Today, about one in eight Americans holds student debt. Americans owe nearly $1.6 trillion in student loans, held by approximately 43 million borrowers. Along with the continued pause on payments, the Biden administration says it has discharged or is in the process of discharging $17 billion in student debt covering more than 700,000 borrowers, which includes over $5 billion of debt for more than 300,000 borrowers with disabilities.

Of the people who attend four-year college, the average student loan debt upon graduation in 2018 was $29,000. Tuition at public four-year colleges increased 36% between 2008 and 2018. According to The Washington Post, as of 2019, 97% of all student debt was held by people earning below the thresholds the Biden administration is considering ($150,000 per single, $300,000 per couple). The Committee for a Responsible Federal Budget says it would cost $245 billion to cancel $10,000 of loans for every student borrower.

Only 6% of borrowers owe more than $100,000, accounting for about one-third of all the student debt in the U.S. 54% of borrowers owe $20,000 or less. Before the pandemic moratorium, the average monthly payment on these loans was $300. The poorest 20% of Americans, when measured by income alone, hold just 8% of all student debt. Almost a third is owed by the wealthiest 20% of households.

You can find our previous coverage of student loan forgiveness from 2020 here, our review of Biden's first year (which touches on how he handled student loan forgiveness) here, and my opinion piece where I argue forgiving student loan debt would help Biden's approval rating here.

Below, we'll take a look at some arguments from the left and right about how to handle student loan debt. Then my take.


What the left is saying.

  • The left mostly supports some student forgiveness, though they disagree on how much.
  • Some argue Biden cannot wait any longer.
  • Others say it's a bad idea, both politically and economically.

In MSNBC, Hayes Brown said Biden can't wait any longer.

"The confusion of debt holders about what’s going to happen — how much we will have to pay back and when — has become a potential political liability for the Democrats," Brown writes. "More importantly, it's caused an untenable state of limbo: Should we be paying down our debts now, when the interest rate is still frozen and our payments can go directly to the remaining balance? Or do we wait until the moratorium is over, holding on to the cash the pause has freed up even as prices rise thanks to inflation?... Last year, the White House said it had ordered the departments of Justice and Education to review whether Biden has the power to delete federal student loan debt. We haven’t heard how that review has gone, even though Democrats in Congress have pushed Biden to act.

"The White House may be planning to wait closer to August to announce a debt cancellation to better give Democrats a needed boost heading into the midterms," Brown said. "But for now, there’s a clear information gap as the administration figures out its game plan, which can only feed into the perception among 18- to 34-year-olds, especially, that the Biden presidency hasn’t benefited them. Meanwhile, a new poll from the Harvard Kennedy School Institute of Politics found that the vast majority of 18- to 29-year-olds surveyed — 85 percent — wanted at least some government help with student loans. A majority of those wanted student loans canceled for at least some people, with 38 percent in favor of canceling all federal student loan debt."

In The Philadelphia Inquirer, Will Bunch said "it’s unfortunate that the fate of this initiative may be decided by the increasingly right-wing, Trump-fried federal judiciary, because forgiving these debts on a massive scale, and probably totally, is the right thing to do from a moral standpoint.

"A whopping 45 million Americans hold college debt right now, and every one of them has a different story of some sort. What most folks don’t realize is how many of these loan recipients — nearly 40%, according to the best research — weren’t able to earn a degree and ended up in the worst of both worlds, struggling to get a good enough job to meet their monthly payments," Bunch wrote. "The Biden administration hopes the $10,000 number would particularly help this category. The young people who were given loans — but not any help in dealing with the many other hassles middle-class kids face in finishing college — are just one piece of the moral argument for loan forgiveness, which in my mind matters more than any economic argument. In one way or another, almost every American who went off to college since the 1980s was sold a bill of goods.

"For some, the scheme was blatant, as lower-income kids desperate to climb the ladder were targeted by often scammy for-profit universities that used boiler-room recruitment tactics and steered students to max out on loans, in a system in which the schools got all of the dollars from Washington while these young people taught underwhelming career skills were on the hook, assuming they even graduated," Bunch said. "But even kids who went to reputable public or private universities have been cheated. That’s because conservative state lawmakers pulled the plug on college as a 'public good' and slashed funding for higher education at the exact time that rapid changes in the economy made a college degree practically the only valid passport for staying in the middle class and at the same time that colleges fought to woo students with expensive prestige branding rather than any effort to keep tuition low."

The Washington Post editorial board said Biden should resist canceling student debt.

"A broad cancellation would offer huge, undeserved benefits to doctors, lawyers and others who do not need taxpayers to foot the bill for their valuable educations," the editorial board said. "The vast number of American taxpayers lacking university degrees would subsidize well-heeled, white-collar professionals. And it would be expensive. Simply extending the pandemic-era pause on student loan payments for four more months, which the Biden administration did this month, will cost some $20 billion. That could finance massive numbers of Pell Grants for poor students.

"Canceling student debt has become a trendy cause in left-wing circles in part because, advocates insist, Congress delegated so much power over student loans to the executive branch that the president could make this massive change with the stroke of a pen," they wrote. "Mr. Biden should continue to resist these irresponsible demands, even as his administration looks for ways to offer more targeted relief. Congress, meanwhile, should make clear that high-income borrowers need no more federal help and instead put the money into university finance programs tailored to aid the needy."


What the right is saying.

  • The right is unanimous in its opposition to loan forgiveness.
  • Many say Biden is trying to "bribe" voters.
  • Others say it is welfare for the upper and middle class.

The Wall Street Journal editorial board called it the "taxpayer con of the century."

"Remember how Democrats sold their student loan takeover as a money-saver? Now millions of borrowers can’t or don’t want to repay their loans, so President Biden says he may cancel their debt," the board said. "The taxpayers who repaid their loans or didn’t go to college will pay instead. The Administration has repeatedly extended what was supposed to be a temporary pause on student loan payments and interest accrual. This reprieve has cost the government $100 billion and counting—money that Congress hasn’t appropriated. Now Democrats want Mr. Biden to compound the damage to taxpayers and the Constitution by writing off loans by presidential fiat.

"Most borrowers don’t need debt relief, but Democrats are hoping to buy themselves political relief before the midterm elections. Young people have soured on President Biden, and Democrats worry they will be as motivated to vote this November as they were to attend a 9 a.m. class. Democrats plan to bribe them to the polls," the board wrote. "Federal student loans were established as part of the Great Society to help low-income students. Yet step by step, Democrats have turned student loans into an entitlement for academia and the affluent. Rather than make college free on the front end—which might have failed to pass Congress—they want to waive the costs at the back end."

Kristin Tate called it "welfare" for the "middle and upper classes."

"Contrary to the picture painted by left-wingers of greedy banksters taking advantage of impressionable young students, 92 percent of student loan debt is held by the federal government — not by private banks. Most of these loans offer an interest amnesty until after graduation. Furthermore, the richest 40 percent of the American public holds 60 percent of the student loan debt, while the bottom 40 percent holds just 20 percent of the debt," Tate wrote. "By 2019, over half of student loan debt was held by those with master’s or doctorate degrees; in other words, those who are typically in the best financial position to pay off their loans are the ones benefiting from the successive student loan repayment pauses. The student loan pauses have cost taxpayers $120 billion so far — and the latest one will tack on another $17 billion. If student loan debt were fully forgiven, there would be an almost $2 trillion bailout.

"The best way to make college affordable is to get the federal government out of the college business," Tate said. "The feds fund most of the student aid, and most college students can qualify for as much money as they need to cover the cost of tuition — regardless of the price tag or personal credit history. These taxpayer-funded loans are given out with artificially set interest rates, and with zero regard for the earning potential of secondary education. This system allows colleges to hike tuition each year with impunity, because no matter what they charge students can finance it with government money."

Jim Geraghty called it Biden's plan to punish the responsible.

"President Biden is on the verge of rewriting a longstanding social contract by deciding that taxpayers should repay significant portions of student loans, instead of the borrowers who took out those loans and received the education," Geraghty wrote. "The biggest beneficiaries would be white Americans under the age of 40 who have graduate degrees and live in high-income, majority-white neighborhoods — in other words, extremely online Democrats. Biden’s Hail Mary pass for the coming midterms is a massive wealth transfer from taxpayers to the Democratic Party’s activist class, and that will exacerbate the already-bad inflation crisis.

"If you take out a loan to buy a house, you must pay it back over time, with interest. If you take out a loan to buy a car, you must pay it back over time, with interest. If you take out a loan to pay for a college education, you must pay it back over time, with interest. You signed a contract. You knew the terms going in — or at least you were supposed to know them. You’re supposed to read the documents you sign," Geraghty wrote. "You knew the payments you were going to have to make and when you would have to make them. If you don’t want to deal with the financial pressure of debt, don’t take out the loan. Joe Biden is on the verge of crossing out that part of the social contract with a red pen and declaring that taxpayers will pay back those debts instead — or at least a significant chunk of them for his preferred demographics."


My take.

I could probably write three or four newsletters on this issue, and I may end up having to. But for now, I'll try to hit on the basics. First, I’ll call out some bad framing of the issue on both sides. Then, I’ll critique the weakest arguments against doing this, before getting into what I think is the best solution for student debt.

Depending on what you’re arguing for, you can spin student debt to make it seem like more of it is where you want it to be. Will Bunch wrote that 40% of loan recipients weren’t able to earn a degree. This is likely taken from an Elizabeth Warren tweet on data from the National Center for Education Statistics. This statistic is misleading, since the 39% of borrowers included in this data set accounted for 23% of the debt borrowed. The data itself is also incomplete, as some of these borrowers may have gone on to complete a degree, and it conflates what was borrowed with what is outstanding.

However, it’s even more misleading to say that the richest 20% of Americans hold 60% of student loan debt. According to analysis from Brookings, when measuring “richest” households by net worth, that figure is “almost a third.” And of the debt held by the richest households, most isn’t up for forgiveness anyway — because of either the income limit or forgiveness threshold, or both. In total, barring some sensationalism on the margins, it’s true to say that most student debt is held by the upper and middle class, but that a significant portion is held by those who would truly benefit from some assistance.

As for the weak arguments against student debt forgiveness:

"It's welfare for the middle class." Welfare is a word people use when they don't like where their tax dollars are going. Progressives deride "corporate welfare" and conservatives deride "the welfare state," but the truth is the government gives some money and a variety of tax breaks to basically everyone. Democratic-led states are less federally dependent than Republican-led states. America's farmers get billions of dollars of taxpayer "welfare" and nobody bats an eye. Calling something welfare doesn't make it bad. The questions should be: Does it help Americans? Is it good for the economy? Is there a moral case for the policy?

"I paid so you should too." I'm certainly sympathetic to this argument. I spent my first few years out of college living a low budget lifestyle to pay off my student debt. I also got an assist from my parents, who had to do their own budgeting to help pay down my college degree. My wife and I are about to uproot our lives and change cities so she can attend a graduate school where she got a scholarship. Certainly, some people who have their loans forgiven will be lazy or rich or both, and in a vacuum they may be less deserving than others who had to pay down their debt. But good policy doesn’t have to help all people to help many people. And again, this is a policy question. Forgiving loans, for instance, could have a positive impact on the economy, which would benefit the country as a whole, not just these individual borrowers.

"Biden is bribing voters." Biden ran on canceling student debt. In fact, the plan he ran on is basically identical to the one he is floating now. When former President Trump did exactly what he said he'd do as a candidate, it was celebrated by his supporters. Why shouldn't Biden also be celebrated for following through on his campaign promises? He got elected, the proposal is wildly popular with the people who voted for him, and now he's trying to execute it. Is the pre-midterm timing conspicuous? Sure. But he's had plenty of other issues to deal with until now. Plus, there's nothing wrong with doing what you said you were going to do and pushing through a policy that's popular with the people who elected you. Frankly, it’s democracy in action.

The glaring issue to me is not that this proposal will benefit a lot of middle or upper-class people, which it will. There are plenty of middle class people buried in debt who deserve some relief — either because they were duped into large loans by predatory lenders, because they have worked hard to pay off the loans but can’t beat the interest rates, or because they entered the workforce in the wake of the 2008 recession through no fault of their own. The bigger issue is that it doesn't solve the actual root cause of the student debt crisis and is a huge risk at a time when inflation is already running sky high.

If Biden is going to forgive, say, $10,000 worth of student loans, the plan should come with a proposal to reform the system that created all this debt. Otherwise, colleges are going to keep jacking up their prices and students may think taking out loans is even less serious than they thought it was 20 years ago, figuring that their debt will just be forgiven anyway. Americans aren't just taking on debt to get to college, they're taking on debt to own homes, buy cars or simply feed their families. Subprime mortgages, predatory lending and exorbitant student debt is now a typical path to today's middle class. As Nicole Hemmer aptly put it, debt "is how the U.S. has chosen to deal with inequality." Until that changes, forgiving loans every 20 years is only going to start the same cycle over again.

As for inflation, the Committee for a Responsible Federal Budget estimates a full cancelation would increase the inflation rate by 0.1% to 0.5%. Full forgiveness seems unlikely, and that rate bump isn't huge, but at a time when we are already in such a precarious spot, the risk shouldn't be ignored.

The solution, of course, would be to push through a comprehensive piece of legislation that delivers targeted relief and also reforms the loan system (or helps fund cheaper and more accessible public universities). Americans seem to be getting wise to the diminishing returns of a four-year degree, but that won't stop the next generation from burying themselves in debt in the hope for a middle class life. I could get on board with some debt forgiveness, but in this economic moment and with so little else on the docket to address the problem, it's hard to see how it ends well.

Have thoughts about "my take?" You can reply to this email and write in or leave a comment if you're a subscriber.


Your questions, answered.

Q:  I heard California passed a new abortion law that the child can be aborted up to 28 days after birth. Is that accurate? Isn't that legalizing murder/euthanasia?

— Laura, Cedar Rapids, Iowa

Tangle: This is one of those stories that immediately failed my "sniff test." If a state were passing a law that allowed newborn babies to be murdered, it'd be the number one story in America and probably the world.

The truth is that California recently passed a bill that does away with mandatory investigations of stillbirths. Before the bill, investigations could occur any time women had a stillbirth (losing a pregnancy after 20 weeks without an abortion). Health care providers and institutions can report people for pregnancy losses. Then women and families who are often grieving are subjected to cruel and unnecessary investigations.

However, the confusion is — in part — the fault of the legislators. An original draft of the bill said, “Notwithstanding any other law, a person shall not be subject to civil or criminal liability or penalty, or otherwise deprived of their rights, based on their actions or omissions with respect to their pregnancy or actual, potential, or alleged pregnancy outcome, including miscarriage, stillbirth, or abortion, or perinatal death.” But perinatal death includes fetal death and death days or weeks after a child is born. Analysts of the bill made a note of this, and legislators changed the draft once they realized their mistake.

Anyway, the point of the bill was to ensure parents aren't criminalized for a failed pregnancy except in the most extreme cases. The idea that any judge would allow infanticide, or any legislator would try to make infanticide legal, is the worst kind of nonsense. Apparently several conservative influencers spread the lie online. I don't always endorse these websites, but I thought FactCheck.org had a good breakdown of the confusion over this.

Want to ask a question? You can reply to this email and write in (it goes straight to my inbox) or fill out this form.


A story that matters.

Families across the country are struggling as a baby formula shortage continues to worsen. Pandemic-induced supply chain issues and product recalls have sent the price of baby formula skyrocketing. One mom in Connecticut said she bought a pack of baby formula for $238 on Ebay (before shipping) that usually goes for $130 at a wholesale store. Meanwhile, major drug stores like CVS and Walgreens are limiting the amount of formula parents can buy in one visit. Axios has the story.


Numbers.

  • 169%. The increase in the cost of college between 1980 and 2019.
  • 19%. The increase in earnings for workers between the ages of 22 and 27 during that same time period.
  • $45,000. The median earnings for young adults with a college degree, according to a Georgetown study.
  • $30,000. The median earnings for young adults without a college degree, according to the same Georgetown study.
  • $10,740. Average cost of college for in-state students at a public four-year university.
  • $38,070. Average cost of college for students at a private four-year university.

Have a nice day.

California is building the world's largest wildlife crossing. Spanning 10 lanes of Highway 101, the construction is aimed at making life safer for mountain lions and other animals living in the Santa Monica Mountains. The $87 million crossing will be 165-feet wide and provide a way to connect the mountains to the Simi Hills, 10 feet above the freeway. The crossing will be surrounded by sound barriers, trees and bushes to encourage the animals to enter. The goal is to bring back genetic diversity to many species that have been isolated from the rest of the state due to the highways, and thus are at risk of extinction. CBS News has the story.


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