This is not a student loan TARP
The idea that President Biden could write off some student debt is starting to gain traction.
During the election campaign, Biden pitched the idea to write off a debt of $ 10,000 for all borrowers, and all debts for those who attended public or historically black colleges and who earn less than $ 125,000 a year. . Plan would write off about a third of America’s $ 1.7 trillion in student debt, expert says told CNBC.
But remember that “forgive” or “cancel” doesn’t mean the debt is gone. This means that you transfer roughly $ 600 billion from borrowers to the US government, which pays off the balance. The only other option is to default on the student loan issuers; forcing them to bear the losses. Unlikely. Plus, the government itself is the biggest emitter, so it foots the bill anyway.
The debt “cancellation” rhetoric has picked up lately in part because supporters say Biden could do it without Congress. “I have a proposal with Elizabeth Warren that the first $ 50,000 of debt be defeated,” said the senator Schumer said earlier this month, as part of his vision for Biden to have an “FDR-style agenda” during his first 100 days. “And we think Joe Biden can do it with the pen rather than the law.”
Again, it looks like Biden can only do this for the debt held by the federal government. If adding $ 600 billion (or $ 900 billion, potentially, as part of the Schumer-Warren Plan) to the deficit doesn’t seem like a big deal, just remember Congress disagrees on a Covid relief bill. of a similar size for months, and that the Fed must already buy more than half of the new US government bonds issued.
But wait – ain’t that the exact plan I called for back in March? Not at all. Because no one is talking about this forgiveness linked to an overhaul of the federal student loan system that has deepened inequalities and turned higher education into a vanity contest between bloated campuses.
As I wrote at the time: “… the federal government withdraws from the student loan market, and in the future, potential students would each simply get a $ 50,000 voucher for college or college tuition. Wayne johnson.
Johnson’s plan also includes a $ 50,000 tax credit for those who have already paid off student debt, paid for by a 1% tax on company profits. Because it is obvious that such a movement of debt cancellation in mass will arouse the anger of a good part of the population (A sin, “Yo @SenWarren, what’s your plan for all those hard-working Americans who’ve taken on second and third jobs to legitimately pay off student debt? Will they be reimbursed? Instead, will the government make payments on their mortgage or credit card debts? What kind of bitch is that?).
There are other concerns as well; what about those who did not go to college? Or wouldn’t additional federal funds be better spent on Covid-specific relief? But like Matt Bruenig observed, “The fact that this type of forgiveness, and only this type of forgiveness, is undoubtedly possible thanks to the action of the executive while other more ideal political constructions are not, may end up being a sufficient answer. to these problems. ”
In other words, just because Biden can to do it, means that there is a chance that it will. If this were tied to a overhaul, as described, of the federal student loan industry, it might really look like FDR; but I don’t hold my breath.
See you at 1 p.m.!