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Thread: Biden's debt relief

  1. #1

    Default Biden's debt relief

    Congratulations to those of you who stand to benefit from this historical event 👍

    https://apnews.com/article/student-l...9af634bf4eb728

    Glad to see the targeted additional relief for Pell grant recipients. Full impact of capping payments etc. will be understood soon enough, I reckon. Impact on equity of borrowers belonging to socioeconomically disadvantaged groups likely to be huge already.

    Is it a done deal or will there be legal challenges? What happens next? What will you do with the money you'll save?
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  2. #2
    This does nothing to change the future. People borrowing money for school today get no relief. People who diligently paid off their loans get no relief. It is pure political pandering.
    .

  3. #3
    Quote Originally Posted by Being View Post
    This does nothing to change the future. People borrowing money for school today get no relief. People who diligently paid off their loans get no relief. It is pure political pandering.
    Being, while I am sympathetic to arguments regarding moral hazard here, and more broadly that this is treating a symptom but not the problem, I think you are too dismissive.

    This will dramatically improve the financial position of a whole lot of people - many of whom are relatively disadvantaged. I can come up with better ways to spend this kind of money, but this isn't an awful one. One thing I was really concerned about is that they'd make it universal - I think it would be the height of silliness if my remaining few thousands of dollars of student loans were cancelled since obviously I have no trouble covering the $75/month. So an income threshold and focusing on Pell grant recipients is welcome news.

    As policy, I'd give it a B-/C+. Not awful, but could be better.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  4. #4
    Quote Originally Posted by wiggin View Post

    This will dramatically improve the financial position of a whole lot of people...
    Are you saying that a $100 to $200 reduction in monthly expenses is a dramatic improvement to their finances?
    .

  5. #5
    Quote Originally Posted by Being View Post
    This does nothing to change the future. People borrowing money for school today get no relief. People who diligently paid off their loans get no relief. It is pure political pandering.

    ...

    Are you saying that a $100 to $200 reduction in monthly expenses is a dramatic improvement to their finances?
    Future borrowers will also benefit from the proposed income-driven repayment scheme, which would cap monthly payments to 5% of discretionary income—defined what they have left after taxes and essential costs of living such as rent and food.

    In addition, they propose to fully cover unpaid monthly interest rather than having that added to your balance, so long as you make your required monthly payments (which may be $0 if your income is sufficiently low eg. because you have a low-wage job or have become unemployed).

    There is also a proposal to forgive all remaining debt after 10 years, for borrowers with original balances of $12k or less. On top of this, two news sources have reported that Parents PLUS loans will also be eligible for forgiveness.

    Combined with the $10-20k loan forgiveness, these measures are likely to have a significant impact on the finances, mobility and well-being of many ordinary Americans—now as well as in the future.
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  6. #6
    Quote Originally Posted by Being View Post
    Are you saying that a $100 to $200 reduction in monthly expenses is a dramatic improvement to their finances?
    If he is, he would be correct.
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  7. #7
    Quote Originally Posted by Being View Post
    Are you saying that a $100 to $200 reduction in monthly expenses is a dramatic improvement to their finances?
    Yes I am. It wouldn't move the needle for me right now, but I'm not the target of this policy. That kind of money is pretty dramatic if you have zero margin in your budget.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  8. #8
    Quote Originally Posted by wiggin View Post
    Yes I am. It wouldn't move the needle for me right now, but I'm not the target of this policy. That kind of money is pretty dramatic if you have zero margin in your budget.
    You and Glint seem pretty sure of this. Would either of you care to estimate the size of budget this will dramatically improve? And why not address the issue of why these borrowers can't get jobs that pay enough so that $100 to $200 a month is nothing more than a discretionary spending issue? Apparently you don't get what you pay for from higher education in the US. Fix that.
    .

  9. #9
    And why not address the issue of why these borrowers can't get jobs that pay enough so that $100 to $200 a month is nothing more than a discretionary spending issue?
    We had that whole conversation about low wages a while back and you flipped your shit at the idea that people should be paid more.
    We're sleepwalking
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  10. #10
    Quote Originally Posted by Steely Glint View Post
    We had that whole conversation about low wages a while back and you flipped your shit at the idea that people should be paid more.
    I do not remember that. I have always advocated for workers.

    My question stands, what size budget will this dramatically improve? What is dramatic in this sense? 10% reduction in expenses? 5% reduction? 1% reduction? $125K per yer salary equates roughly to $7,000 per month in the bank, so $100 per month is 1.4% of the budget. $50K per year salary equates to roughly $3,000 per month in the bank, so 3.3% of the budget. Are these numbers dramatic?
    .

  11. #11
    Quote Originally Posted by Being View Post
    You and Glint seem pretty sure of this. Would either of you care to estimate the size of budget this will dramatically improve? And why not address the issue of why these borrowers can't get jobs that pay enough so that $100 to $200 a month is nothing more than a discretionary spending issue? Apparently you don't get what you pay for from higher education in the US. Fix that.
    I lived as a single adult on $24k a year. A few hundred a month would have been a lot of buffer. I can't imagine how much more important it would be be for a family, even one making $70k a year (approximately median household income).

    And many low income families with student loans were not able to finish their degrees, so they're not getting a big wage premium.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  12. #12
    Quote Originally Posted by wiggin View Post
    I lived as a single adult on $24k a year. A few hundred a month would have been a lot of buffer. I can't imagine how much more important it would be be for a family, even one making $70k a year (approximately median household income).

    And many low income families with student loans were not able to finish their degrees, so they're not getting a big wage premium.
    $70K per year salary equates to roughly $4,000 per month in the bank, so 2.5% of the budget. Is that dramatic? Seems more like the difference between a new model cell phone every year and using the same one for 5 years.
    .

  13. #13
    Given the caps on payments and interest, the protection against balance inflation due to unpaid interest, and the possibility of much earlier forgiveness, I think the numbers you're working with may simply not be accurate for many borrowers.
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  14. #14
    Quote Originally Posted by Being View Post
    $70K per year salary equates to roughly $4,000 per month in the bank, so 2.5% of the budget. Is that dramatic? Seems more like the difference between a new model cell phone every year and using the same one for 5 years.
    When almost all of your monthly paycheck is taken up by rent, bills, etc, adding 2.5% to it is very significant.
    We're sleepwalking
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    We're sleepwalking
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  15. #15
    Quote Originally Posted by Aimless View Post
    Given the caps on payments and interest, the protection against balance inflation due to unpaid interest, and the possibility of much earlier forgiveness, I think the numbers you're working with may simply not be accurate for many borrowers.
    Stretching out the pain (cap on payments)? The numbers I am working with probably represent the majority of the borrowers who will benefit.
    .

  16. #16
    Quote Originally Posted by Steely Glint View Post
    When almost all of your monthly paycheck is taken up by rent, bills, etc, adding 2.5% to it is very significant.
    You know, if you want to give select individuals money just give them money. You don't need to wrap it up as some cure to a problem. It is not. It is purely political pandering. More people without student loans are in just as dire straights as these people with student loans. Give them each $1,200 year to spend. That might actually accomplish something.
    .

  17. #17
    Quote Originally Posted by Being View Post
    Stretching out the pain (cap on payments)?
    Not really, if the loan is forgiven in 10 years—rather than 20 or 25 years—and unpaid interest isn't added to the balance.
    “Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
    — Bill Gates

  18. #18
    Quote Originally Posted by Aimless View Post
    Not really, if the loan is forgiven in 10 years—rather than 20 or 25 years—and unpaid interest isn't added to the balance.
    The program is not law and there is a 50/50 chance it won't survive beyond 2023.

    How about converting to a system of qualified grants in place of student loans? The government really shouldn't be in the business of loaning students money if they are just going to give it back to them later.
    Last edited by Being; 08-25-2022 at 06:00 PM.
    .

  19. #19
    Quote Originally Posted by Being View Post
    I do not remember that. I have always advocated for workers.

    My question stands, what size budget will this dramatically improve? What is dramatic in this sense? 10% reduction in expenses? 5% reduction? 1% reduction? $125K per yer salary equates roughly to $7,000 per month in the bank, so $100 per month is 1.4% of the budget. $50K per year salary equates to roughly $3,000 per month in the bank, so 3.3% of the budget. Are these numbers dramatic?
    1/4 or more of the people with 4-year degrees in the US are presently making less than $22/hour (including me), which would make this the equivalent of a 5% or more pay increase (definitely more, actually, since any pay increase would be taxed).
    Last night as I lay in bed, looking up at the stars, I thought, “Where the hell is my ceiling?"

  20. #20
    Quote Originally Posted by LittleFuzzy View Post
    1/4 or more of the people with 4-year degrees in the US are presently making less than $22/hour (including me), which would make this the equivalent of a 5% or more pay increase (definitely more, actually, since any pay increase would be taxed).
    I would like to know where the 25% comes from because if true it indicates that higher education in the US is a bad investment.
    .

  21. #21
    Quote Originally Posted by Being View Post
    $70K per year salary equates to roughly $4,000 per month in the bank, so 2.5% of the budget. Is that dramatic? Seems more like the difference between a new model cell phone every year and using the same one for 5 years.
    Quote Originally Posted by Being View Post
    You know, if you want to give select individuals money just give them money. You don't need to wrap it up as some cure to a problem. It is not. It is purely political pandering. More people without student loans are in just as dire straights as these people with student loans. Give them each $1,200 year to spend. That might actually accomplish something.
    Quote Originally Posted by Being View Post
    I would like to know where the 25% comes from because if true it indicates that higher education in the US is a bad investment.
    Being, I think you're conflating multiple critiques here. I (and others) have taken issue with the assertion that this debt relief is meaningless to most of the households that will be receiving it. Even a fairly skeptical person would agree that the median American family would get serious benefit from increasing their net worth by $10-40k or decreasing their debt servicing costs by a few hundred dollars a month. Is it going to single-handedly solve all of their financial problems? Obviously not! But it can be quite meaningful on the margin. Frankly, I'm shocked that I'm the person who is having to make this argument - I live in one of those fancy-pants privileged bubbles, but even I can understand how this can be a real boost to your median household budget. It's puzzling to me why you don't recognize it as well. It's also frankly surprising that you don't appear to be aware of the many households who have college debt who are not reaping the typical wage premium due to a variety of factors (such as opting for low paying jobs that still require education like social work or teaching or childcare or whatever, or by being unable to complete a degree, or whatever) and are not able to earn high incomes even if they did incur student debt.

    This disagreement is being conflated with your other critiques of this policy, some of which are salient. You are 1000% right that there are moral hazard issues here - e.g. what is to stop students from taking on oversized debt or colleges offering oversized debt packages for bloated tuitions in the future if they assume future loan relief will come?. Once could argue that this policy is not meant to stand alone, but to be coupled with other efforts to reduce college costs moving forward (e.g. things like making colleges and private loan providers have more skin in the game, forcing colleges to spend more of their endowments on scholarships, increasing transparency on real costs of education, better funding for a variety of publicly funded options). I'm skeptical that such legislation and/or policy will be forthcoming, nor do I believe college price pressures will abate to any significant degree, so I agree this is a reasonable critique of the policy.

    You're also right that there is a fairness problem here - not the oft mentioned fairness issue wrt people who have attended college and already paid off their debts (or those who will attend college and will incur future debt), nor some problem with taxpayers footing the bill. No, the fairness issue - that you do allude to - is with people who are even poorer who don't have student debt because they never had an opportunity to attend college. They could also use a big boost in net worth and a decrease in debt servicing, and are on average poorer than the people who are being helped by this policy. So if I had a few hundred billion dollars of funds to spend on alleviating debt burdens among poorer households, is this the best and most fair/equitable place to spend it? Probably not. That being said, it's not a bad way to spend the money, just not the best way. Hence my argument that this is at best a B-/C+ policy.

    But it's possible to have reasonable critiques of the policy without obscuring the reality that it's still a major boost to a whole lot of households that need the help. Even if it may exacerbate some long running issues and not totally pass the sniff test on equity, it's going to help a lot of households that are struggling. And it didn't need Congress to do jack squat, which is the practical reality we have to face.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  22. #22
    Senior Member Flixy's Avatar
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  23. #23
    The fact that all these congressmen still run businesses (instead of doing their main job) is disturbing. The fact they'd take that much money from the government is worse. The fact they didn't have to pay it back is banana republic territory.
    Hope is the denial of reality

  24. #24
    Really Loki? This whole hypocrisy critique is good politics but it's awful logic. The PPP loan program was specifically designed to have loans forgiven provided certain conditions are met. It's obviously different from student loans which are designed to be even harder to get rid of than normal debt (eg no bankruptcy protection). It's possibly fun to criticize these super absolutist statements by MTG etc (and I have no love for that crackpot) but it's also patently silly.

    You can make a case that sitting members of Congress shouldn't expend energy on their businesses (or even argue they must hand over day to day control to others while they are in office) but taking PPP loans and having them forgiven isn't some kleptocratic antidemocratic nightmare, it's specifically what the program was designed to do. I should also note that receiving PPP money doesn't mean you're personally involved in running the business, a lot of these are family affairs, including MTG.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  25. #25
    Except there's a massive conflict of interest. They designed the laws that both enabled them to get this money and then to have it be forgiven. This would be much less of an issue if they didn't directly control their businesses. Family controlling the business isn't enough. We all know what that means in practice.

    FYI, I'd have to recuse myself if some minor regulation I was working on would directly benefit a family member, let alone if it benefitted me.
    Last edited by Loki; 08-26-2022 at 02:17 PM.
    Hope is the denial of reality

  26. #26
    Again, the issue is whether/how members of Congress can have stakes in businesses, not if they took PPP money as the program was designed to work (and exactly as millions of other entities did). I don't disagree there's a worthwhile discussion to be had about the former, but the latter should be relatively uncontroversial.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  27. #27
    If they have such a principled objection to the government forgiving debt, then no one was actually forcing them to take loans in the first place. No one forced them to vote for the CARES act that brought the PPP Loan program into being, either.
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  28. #28
    Quote Originally Posted by wiggin View Post
    Really Loki? This whole hypocrisy critique is good politics but it's awful logic. The PPP loan program was specifically designed to have loans forgiven provided certain conditions are met. It's obviously different from student loans which are designed to be even harder to get rid of than normal debt (eg no bankruptcy protection). It's possibly fun to criticize these super absolutist statements by MTG etc (and I have no love for that crackpot) but it's also patently silly.
    I can see your point but also. . . kinda not? Yes, the program was designed to have the loans forgiven if certain conditions are met. But frankly, isn't this whole push for student loan forgiveness coming because we've realized that those programs really should be working the same way (under current educational structural and market conditions at least, I'll entertain the idea conditions were different when the programs were first introduced)? Because the real hypocrisy here isn't the personal one (though this crafted political response from the White House is very entertaining and politically apropos) but the difference between attitudes towards individuals and businesses. The denial, grudging acceptance, or condescending approval towards "handouts" for one, and the nigh automatic and warm support for corporate welfare for the other.
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  29. #29
    Senior Member Flixy's Avatar
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    Quote Originally Posted by Steely Glint View Post
    If they have such a principled objection to the government forgiving debt, then no one was actually forcing them to take loans in the first place. No one forced them to vote for the CARES act that brought the PPP Loan program into being, either.
    This. Or, as they put it themselves, if you take a loan pay it back.

    And Loki's point is only strengthened by your argument, Wiggin: if it was designed to be forgiven if certain conditions are met.. they voted and passed those conditions, essentially voting on whether they should get money from the government themselves, seems luka a massive conflict of interest to me. And since you brought it up, why exactly are these corporate loans designed to be forgiven, while student loans are designed not only not to be forgiven, but even protected against bankruptcy? Aside from people not making enough deserving to be punished, but companies are to be coddled and bailed out every decade or so? Or is it because those same politicians don't have student debt, but do own companies and shares?

    Anyway, maybe I get a little sidetracked, but it's ridiculous that someone who can't pay back is stuck with debt forever, while someone who declares bankruptcy 6 (or is it 7?) times is the messiah of the party of 'fiscal responsibility'. And I don't think it's that silly to point out the hypocrisy.

    And for reference, over here, you don't have to do any payments on your student loans if your income is too low, and whatever is not paid back after (I think) 30 years it's forgiven. Seems much more sensible. Of course here the tuition is much, much lower to begin with, and a decent amount is automatically forgiven upon obtaining your degree, and the loans are from the government, so I guess that's too socialist for you guys. But hey, it's not like a well educated society is good for the country (although of course US tuition is outrageously high in some places).
    Keep on keepin' the beat alive!

  30. #30
    Also, a reminder that congressmen can buy a stock knowing a law they're about to propose will significantly affect its value.

    Flixy, the tuition numbers you hear about are misleading. Most people go to community colleges or 4-year public colleges. Including various state programs, tuition for community colleges is a few thousand a year. Most 4-year public colleges charge about $10-15k a year (before scholarships). It's actually cheaper than British universities. It's why most people leave with about $25k in debt.
    Hope is the denial of reality

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