Friday, August 26, 2022

A Step Forward

With clarity, Joseph Briggs and Alec Phillips of Goldman Sachs summarize the student loan policy changes announced by President Biden as

(1) federal student debt forgiveness up to $10k per borrower—and up to $20k per borrower in many cases—among households with income up to $250k; (2) a continuation of the pause on current student loan payments through year-end, after which payments will resume; and (3) an income-driven repayment plan that would cap monthly payments to 5% of a borrower’s discretionary income (from 10% under an existing program).

As an investment bank and financial services company, Goldman Sachs is far less interested in moral hazard, closing the racial wealth gap, or other social implications of the policy than in its impact on the economy, including upon the national debt. The analysts conclude

While the program will ultimately increase the level of federal debt by roughly the amount it reduces student loan balances, the only near-term impact on Treasury cash flows will be a roughly $35bn annualized increase in student loan payments next year as payments resume, but at a level somewhat lower than the pre-pandemic trend due to debt relief.

This not being abortion, criminal justice, race, or religion and politics, about which I have original thoughts, I shall defer to experts and others for wisdom, and not  not only about the debt or inflationary impact of the President's policy.

Twitter liberals and the White House have been ridiculing Republican Representatives, among them insurrection-friendly Vern Buchanan, Matt Gaetz, Marjorie Taylor Greene, and the cruelly named Markwayne Mullen for criticizing Biden's college loan semi-forgiveness a couple of years after they themselves received Payment Protection Plan grants or loans. Under-appreciated are the poor design and administration of that program. Admittedly, individuals the likes of Kanye West, Tom Brady, Jared Kushner, Reese Witherspoon, Gores Vitech Holdings, and the more than 400 country clubs and golf resorts who profited are not complaining. I suppose I wouldn't, either.

Business professor, author, and impressive media personality:

In a response Galloway applauded..... 

Colleges now won't reduce costs, but they probably wouldn't have, anyway. As "Marmalade" and Galloway obviously realize, the main problem is not that individuals go into debt to attend college but that college is much too expensive. It simply costs too much, and doesn't have to.

The predators have gone largely unscathed not because of a bipartisan conspiracy of silence.  Democrats ignore the problem because the academic community is a core supporter, part of the loosely linked Hollywood- academe- legal community triad. Republicans will not ignore the problem once they find a way to exploit it politically.

If there is a parallel between this policy and the PPP, there is also a parallel to the Patient Protection and Affordable Care Act. Former insurance company executive Wendell Potter, who believed the reform would be a marginal improvement to the status quo, in early 2020

maintained that a public option plan would not ultimately “get us where we need to be,” arguing that the fundamental problem with the current health care system isn’t about access, but rather about cost.

“We all theoretically in this country have access to health care, so that’s not the main issue,” he said. “It’s that we can’t afford it — even those of us who have health insurance can’t afford to get the care that we need.”

We have access to health care and to higher education, if only we could afford them. Yet, as the constitutional republic we have, with its innumerable flaws, is superior to the alternative, so, too, was the ACA superior to its predecessor.  (There is a sale at Costco this month on commas.)  President Biden's response to the college debt crisis is inadequate, probably inefficient, and could have been improved, but is better than nothing.


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