Tag: student debt

Join Jim and Greg as they welcome news of the 8th Circuit Court of Appeals placing an injunction on President Biden’s plan to make the rest of us pay off student loan debt. They also shudder as the October number of illegal border crossings soars again and that the crisis seems to have had little impact on the midterm elections. And while they like Mike Pence, they have no idea who Pence thinks would vote for him if he launches a presidential campaign.

 

Student Debt Cancellation Is Constitutionally Infirm

 

In one of the most audacious acts of his presidency, President Biden recently issued a fact sheet offering “Student Loan Relief for Borrowers Who Need It Most.” To Biden, that group consists of all individuals who have received student loans but have not yet paid them off, with an exception for loan payments made during the pandemic. The president wants to give this group “breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.” The terms of the proposed loan forgiveness program are clear: the Department of Education will allow for $20,000 in debt relief to Pell Grant recipients—undergraduates with exceptional financial needs—and $10,000 for other students, so long as their individual income is under $125,000 per year (or $250,000 for a married couple). The plan also makes a number of technical adjustments that cut repayment rates for future loans.

The equity of this program has been under fierce attack for forcing the impending financial shortfall on the shoulders of individuals who have already repaid their loans, blue-collar workers who never took out loans, and the general taxpayer who already faces heavy rates. And the burden is no small thing: the Wharton financial model projects that the cancellation program will cost over $500 billion, and could jump to over a trillion dollars depending on future regulations and practices on both existing and new loans.

One might expect that a program of this magnitude would receive extensive congressional discussion followed by legislative approval. One would be disappointed. Here, the president is proceeding by executive order, which he claims is authorized under the HEROES Act of 2003 (an acronym for The Higher Education Relief Opportunities for Students Act). Biden relied on an extensive memo by Christopher Schroeder, the head of the Office of Legal Counsel, an office within the Department of Justice that provides legal advice to the president and all executive branch agencies. The memo does not hold water. The key provision of the HEROES Act on which it relies reads:

Join Jim and Greg as they serve up two bad martinis and a crazy one. First, they groan as the Biden administration foolishly pursues a new Iran nuclear deal that in several ways would be even worse than the original. They also fume as California lays out plans to ban the sale of gasoline-powered cars by 2035, explain how electric vehicles are a thoroughly unacceptable option for millions of Americans, and how government has no business forcing options on us that we don’t want. And they have a LOT to say about the Biden administration’s rollout of its plan to force Americans who didn’t take out student loans or have paid them off to cover those costs for others.

Hubwonk host Joe Selvaggi talks with education financing expert Mark Kantrowitz about the $1.6 trillion in U.S. public student debt – who owes it, who stands to benefit from the Biden administration’s recent promise for across-the-board student debt reductions, and what strategies are available to target only those most in need.

Guest:

This week on “The Learning Curve,” co-hosts Gerard Robinson and Cara Candal talk with Dr. Matthew Chingos, who directs the Center on Education Data and Policy at the Urban Institute. They discuss the “Year of School Choice,” the welcome 2021 trend of states across America expanding or establishing private school choice programs. Dr. Chingos describes the gradual evolution of private school choice programs from primarily school vouchers to tax credit scholarships and education savings account programs (ESAs), which have been growing in popularity, and how charter public schools fit into this growing portfolio. He offers thoughts, as a researcher and scholar, on how using data to analyze, enhance, critique, and hold schools accountable for students’ academic improvements has transformed K-12 policy discussions, and how COVID-19’s discontinuities will impact accountability and decision making. They explore another topic of Dr. Chingos’ research, the $1.6 trillion student loan debt crisis, reasons why tuition has skyrocketed, and some of the possible pathways forward. Lastly, he shares views on issues of academic quality within higher education, and whether colleges and universities have lost their sense of mission.

Stories of the Week: In California, where only 32 percent of the state’s fourth graders were performing at or above proficient in reading, a proposed ballot measure is taking aim at those practices that protect ineffective K-12 teaching. Despite being the home of tech giants like Google, Facebook, Microsoft, and Amazon, the state of Washington has reported that a mere 9 percent of its public high school students were enrolled in computer science courses during the 2019-20 school year.

Avoid the Pitfalls of Student Loan Forgiveness

 

One looming issue facing the incoming Biden administration is what to do with the $1.7 trillion in outstanding student loans, mostly held by the federal government. The most recent internal government analysis found that the United States will lose about $400 billion on its current portfolio of $1.37 trillion, a number likely to increase as the government continues to allocate about $100 billion per year in new student loans. Notably, that analysis did not include the roughly $150 billion in loans backed by the federal government but originated by private lenders.

By way of comparison, private lender losses on subprime loans in the residential lending market were about $535 billion during the 2008 crisis. The student loan and subprime mortgage crises share the same root cause: by statutory design, the government wished to expand both markets, such that loans were made with little or no examination of the borrowers’ creditworthiness. The meltdown of the residential home market arose because private lenders relied on the implicit federal loan guarantee. In the end, this practice pushed Fannie Mae and Freddie Mac, the holders of weak mortgages, over the edge, and ultimately resulted in the wipeout of all the private common and preferred shareholders of the two companies.

Fortunately, the absence of private shareholders ensures that the student loan crisis is not likely to generate such chilling collateral consequences. But the problem of borrower defaults will not go away soon, given that the federal government continues to pump billions of dollars each year into student loans. Unfortunately, this constant infusion of new capital into the lending market is causing increases in college tuition that outstrip inflation, imposing additional costs on individuals who do not take out student loans, and raising the overall cost of education above competitive rates.

Join Hubwonk host Joe Selvaggi as he talks with Chris Abkarians and Mikhil Argawal, co-founders of LeverEdge, about how their new student loan platform uses loan aggregation and competition to secure better rates for student loans.

Guests:
Chris Abkarians is a co-founder of LeverEdge, the first collective bargaining group for student loans. He is a graduate of  Harvard Business School and received degrees in Public Policy and Political Science from Duke University.

As Massachusetts senator and presidential candidate Elizabeth Warren tries to bribe college students into voting for her with promises of student loan debt forgiveness and free college, the Young Americans draw from their own experiences to discuss Warren’s plan, the student loan debt crisis, and what, if anything, we can do about it.

Member Post

 

Kevin Williamson just published an article at National Review where he advocated eliminating all government and bank-financed student loans. While I understand the logic behind his ideas and support getting rid of government-based student loans, I think his ideas are woefully insufficient at dealing with one of the root causes for the over $1 trillion […]

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Hold on to Your Wallet: Elizabeth Warren Has an Idea

 

Elizabeth Warren fixed her gaze on the White House the moment she arrived at the US Senate. Today, she’s actually running for the presidency, but it is not going well. Monday morning, a poll out of New Hampshire showed her with just five percent. Residing next door in Massachusetts makes the Granite State a must-win for the senator, yet she trails Bernie, Biden, and Buttigieg by double digits.

You can’t say she isn’t trying. Each week she unveils another progressive plan to win over the woke. Today, she announced not only free college but debt cancellation for most grads. Here are the details:

  • Cancel debt for more than 95% of the nearly 45 million Americans with student loan debt;
  • Wipe out student loan debt entirely for more than 75% of the Americans with that debt;
  • Substantially increase wealth for Black and Latinx families and reduce both the Black-White and Latinx-White wealth gaps; and
  • Provide an enormous middle-class stimulus that will boost economic growth, increase home purchases, and fuel a new wave of small business formation.

And how on earth would she pay for such a thing? An “Ultra-Millionaire Tax” that would slap an additional 2% annual tax on families with $50 million or more. Yeah, I’m sure that’ll work.

Member Post

 

Redesigning State College: Lessons from the Sharing Economy The state of Texas is in the college business. Texas has chartered over three dozen colleges and universities. Those colleges have been granted land and are supported annually through the state budget, and the Permanent University Fund, a public endowment which supports colleges in the University of Texas […]

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How to Win Arguments and Alienate Bernie Sanders Fans

 

Screen Shot 2015-12-08 at 4.05.43 PMSomehow, I ended up on an email list of liberal education ideas (I repeat myself) and encountered the following gem. While the debt forgiveness movement has been getting some attention this cycle, it’s nice that really liberal liberals are attacking mere liberals and giving us our rebuttal:

The joint report by Demos and the Institute on Assets and Social Policy, two progressive think tanks, found that getting rid of all student-loan debt—writing off the amount college grads borrowed to get a bachelor’s degree or to complete graduate school—would help white households far more than African American ones and would actually increase wealth disparities between the two groups.

If you’re a glutton for punishment, read the full article.

Majoring in Positive Thinking

 

shutterstock_157494929These days, you can go to college for just about anything and get the government to underwrite and subsidize your loan, to the tune of tens of thousands of dollars. As Megan McArdle writes, there’s a case to be made for some public financing of education:

There is actually some economic logic to encouraging people to borrow money for school. Education is an investment in human capital, and expensive capital goods are often financed. Doing so makes everyone better off: The lender gets a tidy return, and because the borrowers increase their ability to make money, they can make their interest payments and still be richer than they would have been if they’d painstakingly saved up the money for 10 or 20 years before making the investment.

The problem isn’t that a liberal arts education is a bad idea, let alone one opposed to the public interest. If we stipulate that earning a liberal arts degree confers critical thinking and writing skills as well as a deeper understanding of one’s culture and history — as, indeed, some still do — then it’s trivially easy to see how that knowledge and those skills would benefit society at large, at least in the aggregate. In economic terms, there’s little question that a good liberal arts education has positive externalities.

Is It Moral To Default On Your Student Loans?

 

leesiegel080121_198Lee Siegel, a prominent culture writer and graduate of Columbia, seems to think so:

Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society.

Naturally, Siegel was the best judge of his “particular usefulness to society.” But he then goes onto mock those poor suckers who, rather than shirking their legally contracted debts, go out and get real jobs that might be beneath their talents and ambitions.