Student loans
- Thread starter msstate7
- Start date
acesfull86
Well-known member
https://reason.com/2022/08/26/no-ppp-doesnt-justify-bidens-student-loan-bailout/
Yes, it's admittedly fun to watch Rep. Marjorie Taylor Greene (R–Ga.) get dunked on, but this comparison wouldn't make much sense even if the Paycheck Protection Program had been a success—which, again, it wasn't.
For one, the loans were a response to an unexpected emergency, and they were intended to make whole individuals who were put out of work, in many cases, by the government's own decision to force businesses to close. As you're probably aware, the government does not force anyone to take out a student loan. (In fairness, the federal subsidized loan programs do create bad incentives for borrowers, but that's not quite the same.)
Additionally, the loans handed out by the Paycheck Protection Program and subsequently forgiven were a temporary thing. If the analogy to student debt relief is accurate, then the government would have to also stop handing out discounted student loans that have warped the marketplace and created this entire mess. That would be a good idea! Too bad it isn't happening.
…
Still, probably the most important failing of this comparison is what I covered at the very top of this post. The Paycheck Protection Program was a mess! Yes, Taylor Greene and other members of Congress got huge loans that they didn't have to pay back as part of the federal government's bloated and wasteful COVID emergency measures. You should be outraged about that. But the proper response to one failed bailout is not another bailout.
At its core, this comparison of the Paycheck Protection Program to the student loan forgiveness program boils down to "someone else got free money, so I deserve free money too." That's the sort of logic you'd expect from a toddler, not from anyone who ever aspired to attend college and certainly not from the White House's official messaging apparatus.
—————
Should go without saying, but apparently it needs to be said.
Yes, it's admittedly fun to watch Rep. Marjorie Taylor Greene (R–Ga.) get dunked on, but this comparison wouldn't make much sense even if the Paycheck Protection Program had been a success—which, again, it wasn't.
For one, the loans were a response to an unexpected emergency, and they were intended to make whole individuals who were put out of work, in many cases, by the government's own decision to force businesses to close. As you're probably aware, the government does not force anyone to take out a student loan. (In fairness, the federal subsidized loan programs do create bad incentives for borrowers, but that's not quite the same.)
Additionally, the loans handed out by the Paycheck Protection Program and subsequently forgiven were a temporary thing. If the analogy to student debt relief is accurate, then the government would have to also stop handing out discounted student loans that have warped the marketplace and created this entire mess. That would be a good idea! Too bad it isn't happening.
…
Still, probably the most important failing of this comparison is what I covered at the very top of this post. The Paycheck Protection Program was a mess! Yes, Taylor Greene and other members of Congress got huge loans that they didn't have to pay back as part of the federal government's bloated and wasteful COVID emergency measures. You should be outraged about that. But the proper response to one failed bailout is not another bailout.
At its core, this comparison of the Paycheck Protection Program to the student loan forgiveness program boils down to "someone else got free money, so I deserve free money too." That's the sort of logic you'd expect from a toddler, not from anyone who ever aspired to attend college and certainly not from the White House's official messaging apparatus.
—————
Should go without saying, but apparently it needs to be said.
acesfull86
Well-known member
https://marginalrevolution.com/marginalrevolution/2022/08/the-student-loan-giveaway-its-much-bigger-than-you-think.html
Wiping out 10k in student debt is not the most expensive part of the Biden student loan program. Most Federal student loans are now eligible for an income based repayment plan, under these plans you pay a small percentage of your “discretionary” income, say 10%, and then after a fixed number of years the debt is wiped off the student’s books. At first glance these plans don’t seem crazy, but as Matt Bruenig points out they create perverse incentives:
Under the Public Service Loan Forgiveness (PSLF) program, law graduates that go on to work in the public sector, which is a lot of them as the public sector employs many lawyers, only have to pay 10 percent of their discretionary income for 10 years in order to have their debt forgiven.
Law schools figured out many years ago that, for a student who is planning to enroll in PSLF upon graduation, prices and debt loads don’t matter. Ten percent of your discretionary income is ten percent of your discretionary income regardless of what the law school charges you and how much debt you nominally have to take on.
Law schools also realized that they could make the deal even sweeter by setting up LRAPs [repayment programs, AT] that give graduates money to cover the the modest repayments required by the PSLF.
The LRAP schemes work as follows:
The school increases their tuition.
The student takes out federal loans to cover the tuition increase.
The school squirrels away the debt-financed tuition increase into an LRAP fund.
The school disburses money from the LRAP fund to cover PSLF repayments.
Did you get that? Here’s a stylized example. Suppose a student will make 150k per year for 10 years working in the public sector. If they have 200k in debt they pay 15k every year to the government for 10 years and then 50k is “forgiven.” But now the law school comes to the student and says ‘heh, I have a deal which will make both of us better off. We are going to raise the price of law school to 400k but don’t worry not only won’t that cost you a penny more than the 15k a year you are already obligated to pay it will actually cost you much less because we will pay your payments of 15k per year!’ 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.
But wait there’s more. Student loans can be used not only to pay tuition and fees but also to pay “living expenses.” Thus, under these plans, students have an incentive to take out as big a loan as allowed in excess of tuition and fees because no matter how large the loan the student’s costs are zero!
Wiping out 10k in student debt is not the most expensive part of the Biden student loan program. Most Federal student loans are now eligible for an income based repayment plan, under these plans you pay a small percentage of your “discretionary” income, say 10%, and then after a fixed number of years the debt is wiped off the student’s books. At first glance these plans don’t seem crazy, but as Matt Bruenig points out they create perverse incentives:
Under the Public Service Loan Forgiveness (PSLF) program, law graduates that go on to work in the public sector, which is a lot of them as the public sector employs many lawyers, only have to pay 10 percent of their discretionary income for 10 years in order to have their debt forgiven.
Law schools figured out many years ago that, for a student who is planning to enroll in PSLF upon graduation, prices and debt loads don’t matter. Ten percent of your discretionary income is ten percent of your discretionary income regardless of what the law school charges you and how much debt you nominally have to take on.
Law schools also realized that they could make the deal even sweeter by setting up LRAPs [repayment programs, AT] that give graduates money to cover the the modest repayments required by the PSLF.
The LRAP schemes work as follows:
The school increases their tuition.
The student takes out federal loans to cover the tuition increase.
The school squirrels away the debt-financed tuition increase into an LRAP fund.
The school disburses money from the LRAP fund to cover PSLF repayments.
Did you get that? Here’s a stylized example. Suppose a student will make 150k per year for 10 years working in the public sector. If they have 200k in debt they pay 15k every year to the government for 10 years and then 50k is “forgiven.” But now the law school comes to the student and says ‘heh, I have a deal which will make both of us better off. We are going to raise the price of law school to 400k but don’t worry not only won’t that cost you a penny more than the 15k a year you are already obligated to pay it will actually cost you much less because we will pay your payments of 15k per year!’ 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.
But wait there’s more. Student loans can be used not only to pay tuition and fees but also to pay “living expenses.” Thus, under these plans, students have an incentive to take out as big a loan as allowed in excess of tuition and fees because no matter how large the loan the student’s costs are zero!
acesfull86
Well-known member
https://www.theatlantic.com/ideas/archive/2022/08/an-economists-case-against-biden-student-loan-forgiveness-plan/671259/
^ Education hating economist Jason Furman of the far right wing Obama administration on why this is a bad idea
^ Education hating economist Jason Furman of the far right wing Obama administration on why this is a bad idea
sturg33
I
Anyone who isn't a braind dead.sheep.understands how stupid this is
There is no reason for.colleges not to charge more... This is now the baseline of forgiveness... When it fails they will demand more and the Dems will oblige
Not to mention the huge middle finger to people who were responsible
chop2chip
Well-known member
Furman knocks it out of the park with his analysis of a disastrous policy. I’m glad we now have a unilateral system of a tax czar. Whomever is president, by royal decree, can wave his or her magic pen and choose to steal money from one group and give it to another. Biden is stealing disproportionately from the Black community and giving it disproportionately to the white community.
sturg33
I
He also correctly noted that trump resisted the urge to do these things unilaterally... (While being called a dictator for four years)
acesfull86
Well-known member
Still a big "no comment" on what changed from the time Pelosi said the POTUS couldn't eliminate student loan debt to now. She herself tweeted something about how this was a "bold action & strong step to expand education access," or some nonsense to that effect, while choosing to punt on the whole legality piece.
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chop2chip
Well-known member
Democrats will likely retain the Senate and everyone will point to this as a reason. The next two years leading up to the “Election (TM)” will be one hand out after another.
msstate7
Well-known member
Maybe the house will be R. I prefer gridlock.
The democrats were guaranteed to keep the senate due to horrible R’s on the ticket. Oz and Herschel walker are horrible.
acesfull86
Well-known member
Via Forbes:
Education Department officials confirmed on Friday that the Biden student loan forgiveness initiative is a one-time opportunity, so borrower’s should not expect this to happen again.
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Lol
Education Department officials confirmed on Friday that the Biden student loan forgiveness initiative is a one-time opportunity, so borrower’s should not expect this to happen again.
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Lol
chop2chip
Well-known member
If it’s such a good idea, why not do it again?
acesfull86
Well-known member
The payment pause was extended seven times ("but this time we swear it's the last extension!") and we're supposed to take them at their word
Tapate50
Well-known member
There are no adults in the room
acesfull86
Well-known member
https://www.econlib.org/your-new-student-debt/
“ Congrats to everyone who didn’t have college debt. Now you do.”
“ Congrats to everyone who didn’t have college debt. Now you do.”