Sanders’ debt relief plan: what could you do with $1.6 trillion?

Harry – If you use scientific notation, you won’t need to repeat the calculation.
1.6 x 10^12 / 1 x 10^5 = 1.6 x 10^7 (simple subtraction: 12 – 5 = 7).

The point of this post would seem to be that ‘we’ can’t afford $1.6 trillion. Indeed it’s a lot of money. If only the United States regularly spent roughly that sum of money (every two years, say) on completely worthless and pointless things and activities which could be easily cancelled without any ill-effects (indeed, with many positive effects, not least for the people’s of the world) that could pay for this essential move towards social justice.

Oh well. As, according to the media, no such thing exists, it seems that American graduates will just have to live in peonage forever.

https://en.wikipedia.org/wiki/Military_budget_of_the_United_States

Hunter K., I agree that forgiving student loan debt reduces its drag on the economy, although it may not be the only way. I found the tax deduction for interest payments was materially helpful to me, and that could be a bigger break. I was very hopeful as a public employee that those of us who went into the public sector and made so little there would qualify more easily and rapidly for forgiveness, and that would be a good means-related way to forgive some debt. But I think Harry’s correct that not all student loan debt IS a drag on the economy. For very well-paid people, it is more like a reduction in their expenditures than a drag, and the payments that loan-bearers make — if the USA still does this, I’ve moved to Canada and lost track — but the payments that I made went directly back to the loan program to help others as I was helped. So I’m sympathetic to the larger point that Harry’s making, that forgiveness for all debt holders just is not the best way to go forward, in principle. In practice I think that Jerry in comment #1 is correct, since this is all moot in practice as the next president won’t be able to do anything like forgive all debt, nor pass a wealth tax.

Two things about the conversations I’m seeing here and elsewhere since this plan was announced stand out to me.
1) Lots of well-meaning generally sympathetic types point out that many beneficiaries are doing pretty well financially, thank you very much, and aren’t having any trouble paying off their loans, and consequently (as mentioned by the OP) the money would be better spent elsewhere. Many of these people support targeted relief for those who are struggling with repayment, and/or making college free/more affordable moving forward, but oppose sweeping debt cancellation.
2) Variations of “I paid off my loan, or am almost done paying off my loan, and I want other non-wealthy kids to have to suffer like I did because [insert euphemism for “misery loves company” or “if I had to suffer, so should you” here].” These people seem highly resistant to consider the facts that college is a lot more expensive now than it was 20 years ago and also that progress sometimes involves improving things in the present without being able to go back in time and improve things for people in the past, as well.
I get the first argument, but I mostly see it made by pretty well-educated folks who generally fall into the category I guess you could call “chin-scratchers,” who like (or at least appreciate) complexity and nuance. (These are also, almost universally, people who still can’t wrap their heads around the fact that the election of Donald Trump happened as a result of him legitimately winning the EC because enough of us voted for him.) To these people, I suggest they consider the political value of universality, and the moral difference of saying “ludicrously high debt taken out to fund a degree people were raised to believe was virtually the only way to enter or remain in the middle class shouldn’t ruin as many people’s lives quite so much” and “the way we’ve been doing this is just plain wrong and we’re going to address it for those still dealing with it and for those who want a college degree moving forward.” It’s the difference between making a bold moral statement and then backing it up and admitting there were some flaws in execution and working to address the results for those who can prove they’re sufficiently affected to deserve relief.
To the people making the second point, I suggest they recognize the fact that many if not most of the people currently paying off student loans graduated into an economy ruined by their parents’ generation, who not incidentally paid far less for their state college educations because they used to be more generously subsidized, and likely worked in jobs that don’t even require the degree they led to believe would lead to a secure middle-class life. Also, past injustice isn’t an excuse for present or future injustice.
I spent years working with high school kids and their families as a guidance counselor, and saw almost as many approaches to dealing with the cost of college as there currently are candidates for the Democratic nomination. I watched not a few very bright, capable students choose the cheaper option, rather than the best option. I watched a lot of well-off families send their kids to the “best” school that accepted them, with the understanding the kid would never be responsible for a cent. There are already so many ways the playing field is tilted in favor of the already-advantaged that worrying that paying off the loans of some undeserving anesthesiologist seems almost comical when the restrictions put in place to keep that happening would likely also affect the first-gen college student currently working as a teacher who’s taking out loans to pay for the graduate credits their district requires them to earn.
I feel like there’s probably overlap between those who are against paying off the debt of “people who can afford their payments” and those who love the EITC, which does a lot of good but which ingeniously hides itself so well as to be nearly invisible to many recipients. The universality is the point. And yeah, the grand sweeping gesture of it is the point. It’s a statement of principle. And I think it’ll turn out to be politically smart, if it’s reported on with good faith, rather than eyerolls and smirks from those who just know (wink wink) it’s an impractical stunt.
Anyway. Sorry for ranting, but this is exactly the kind of sweeping Statement of Purpose gesture the Dems are usually so bad at, and I think it deserves support and attention for the guts to lay it out there. It’s not a coincidence to me that the two other top-line backers are Jayapal and Omar, who (missteps aside) both seem to have pretty good instincts and rock-solid reputations for walking the walk, as far as I can tell.

Why not just mail out 250 million debit cards, each with a $6,400 bank account?

Just try to (finally) understand:

It’s not about ”the money” –
(as WE – US – have so much of it – that everything seems to be ”only about ”the money”)

It’s about teaching America how a ”Modern empathetic Democracy looks like ”- and Sanders knows very well that ”Free Education” is only ONE of the major ”criteria”.

As long as we want to discuss impossibilities, just revert to making student debt dischargeable in bankruptcy, which exists exactly to handle problems in every other kind of loan. I’ll point out that Sanders’ proposal is giving $1.6T not to the students, but to the lenders–hardly seems a populist move.

I must tediously impart one caveat about a wealth tax: much of the wealth of the wealthy isn’t real. I am not sure what happens when you suddenly convert $1.6T of funny money into another form which people may take seriously.

Patrick: I’m trying to find a way to politely say this, but what you wrote is short-sighted and terrible. As a have-not you made imperfect choices in a flawed system which others may or may not have been in the same position to make; to now lament that other have-nots might have their lives improved seems the worst kind of pettiness and self-violence. Your guns are pointing in exactly the wrong direction.

T

Gabriel- I know that’s the canned response but it’s kind of a joke. No one is going to be privilege shamed into feeling like they were lucky to turn down an expensive college because they didn’t think they could afford it, and the fact that you can’t see that suggests I am not the one who maybe needs to check their privilege and lack of connection to Americans with money problems.

I know how the game works. No matter how badly off I may have had things there’s always someone worse off you can weaponize. “What about the worst off among us??” you will moan as you advance a giveaway that in no way whatsoever targets the people who’s hardship you’re appropriating.

Hunter K.

The clear difference between student loan debt and other kinds of debt that make it such an albatross is that you cannot divest student loan through bankruptcy. The *only* way to remove its drag on the economy is to forgive it.

<a href="https://crookedtimber.org/2019/06/25/sanders-debt-relief-plan-what-could-you-do-with-1-6-trillion/#comment-751700

As long as we want to discuss impossibilities, just revert to making student debt dischargeable in bankruptcy, which exists exactly to handle problems in every other kind of loan.

A change which would have a cost to the US Federal Budget of nil.

The Heretic

From an MMT perspective, a sovereign nation can wipeout or redeem any debt owed to it, if that debt is written in its own sovereign currency.

From an MMT perspective, the monetarily sovereign nation does not need the money of the rich to pay for debt forgiveness.

Any debt can be forgiven by the creditor; monetary sovereignty is not required. In the case of US student loans, however, the US government is not the creditor. (Or is it for some? I don’t know. It’s not the creditor for all $1.6tn, in any case.)

Well, would you rather that $1.6 trillion be spent on actually useful things, or would you rather it go to loansharks? Because that $1.6 trillion (or at least some significant portion of it, since it’s doubtful much of that money would ever be fully repaid. Debts that can’t be repaid, won’t be) is going to be used for something. If you forgive $1.6 trillion in debt, you’re freeing up $1.6 trillion in future spending.

Outright debt forgiveness has a long and noble history. Civilization was literally built on it. It’s time we resumed it as a policy.

Also, the between the official budget and the black budget spending, the US military spends at least that much every year, and yet I never see much swooning into the fainting couches over that spending. We can always find the money to literally murder people and destroy countries, but debt forgiveness? Oh no, thatsvthe issue that brings the impassioned liberals out of the woodwork.

Whatever happened to “milliards”, ie. Thousands of millions? They are used in some old history textbooks to describe German reparations debt in 1919.

Politics is the art of the possible. This policy may not be the most optimal on paper but: 1. It has clear beneficiaries who know who they are, know exactly the degree to which they will benefit, and are motivated to fight for it.

Congratulations on inventing pork barrel politics

The Heretic is correct. Let me especially endorse the idea that we do not need to fund this loan forgiveness by taxing the very wealthy, although we should tax the very wealthy for other excellent reasons.

Perhaps I can explain it a little differently.

Money is not a resource like oil (nonrenewable) or water (renewable over time); money is a social construct. It is not the case that just because we forgive $1.6 tr in debt, then we will must give up $1.6 tr worth of goods and services, in the same sense that that it is the case that just because we allocate 1.6 tr gallons of water to produce almonds, we will have 1.6 tr gallons less water for other uses (until it rains again).

The question to ask is: what effect would debt forgiveness have on the demand for and production of real goods and services?

First, loan forgiveness will increase disposable income immediately for anyone with loans of less than the forgiveness amount, and it will eventually increase disposable income for those with more than the forgiveness amount, when they have paid off the unforgiven remainder of their loans. Increasing disposable income increases aggregate demand.

Second, it will immediately increase the wealth of everyone by the amount of loans forgiven, which will also increase aggregate demand.

The critical question, then, is will this increase in aggregate demand be spent on goods and services with relatively elastic or relatively inelastic supply? If the former, the increase in aggregate demand will cause an increase in aggregate supply as producers increase production and hire more workers (directly or indirectly by buying more physical capital), and we would have a “free lunch” of increased GDP.

If the latter, we will have inflation, and we really would be trading off debt forgiveness for real goods and services.

More careful theoretical and empirical inquiry could, I think, reveal the answer. However, aggregate demand is presently too low, loan forgiveness will probably affect more lower- and middle-income people with a higher marginal propensity to consume, so my naive intuition is that loan forgiveness would show up as more increase in real GDP and less overall inflation.

The real student debt crisis is not about people who graduated, but people who didn’t

How about a wipe-out just for those who didn’t graduate? (As I’ve said before I think you sometimes paint these group differences in rather black and white terms: elsewhere I saw a story from someone who attended and graduated college after spending most of his twenties in prison and discovered the degree to be effectively worthless.)

Maybe the 1.6T should fund financial literacy, it seems a lot of people are lacking.

Median student loan debt is about 17k, average is about 30k. The difference as Harry points out is mostly graduate school debt. Graduate debt is a choice to earn higher income, its the ticket to the fourth, fifth and sixth rungs on the ladder, not the first. It shouldn’t be part of any forgiveness program.

Second — so Bernie forgives $1.6T…nearly all of that has been racked up in the 10 years since the Federal government took over running student loans in the first place (which incidentally the related Obama budget foretasted would generate 87B of revenue, not 1.6T in loss).

What happens next? Kids will still need loans to go to school. No poor kid who couldn’t get a loan would suddenly get one. In another 10Y there would be at least another 1.6T run up and that too would need forgiving. It actually would be far more since rich folks who might otherwise fund their kids education would instead borrow every damn nickle they could get and wait for the next Bernie to play loan-Santa and accordingly be lined up for the handout.

Sorry this is just bad policy. Vote and attention getting yes, but absolutely bad policy.

Spend the same money and make higher education free prospectively….far, far better bank for the buck and would target the benefit to people who can’t afford an education rather than reimbursing those that could.

Lastly, all this B.S. about forgiveness being free is crap. If the loans are held by banks or financial institutions – the Fed Govt still needs to repay them because they are in private hands….the are on the federal books as an asset.

If you remove an asset from the books it has to be replaced with another asset – tax dollars, or printed money. If its printed money it has to be raised from Treasury bond sales which redirects investment from other productive capacity to financing the related deficit….there’s no magic money fairy that creates money without diverting it from some other source.

– and about this”

”If you remove an asset from the books it has to be replaced with another asset – tax dollars, or If you remove an asset from the books it has to be replaced with another asset – tax dollars, or printed money.”.

”… ”printed money…” –
or as my friend Paul (Krugman) always tells me – that we -(the US) can print as much money as we want – we will just print as much money as we need for this ”debt” forgiveness – BE-cause this might be one of the few times I completely agree with Hidari:

…”not all capitalist societies have a system of debt slavery, in which people live the rest of their lives being crushed by debt, being punished for the crime of wanting an education”.

There are ”some capitalist societies” where any type of education is FREE – and some of you might fight all you want – but there is NO other way than -(sooner or later) our homeland has to go on such a ”FREE educational system.” – and Bernie AND Mr. Warren just understood this fact a lot earlier – than some on CT?

Why?-
I really don’t know?

I just want to reiterate something that Peter Dorman said because it’s impossible. Any time you have a debt jubilee it’s a wealth transfer from one group to another. It’s accounting. No new resources are required. You’re simply moving numbers from one part of the national balance sheet to another. That’s how debt works.

The original analogy doesn’t make any sense, because investing in schools would require real resources. Eliminating student debt does not. This is a purely political choice – just like any form of taxation and transfer spending (e.g. social security, welfare).

So there is no choice between doing this, or spending more on Pre-K. And incidentally the same is true if we talk about making state college free. No new resources are required to make that happen. All that you would be doing is pulling the money from a different part of the economy to pay for it. And yes – this is also true for healthcare. All these things can be paid for BECAUSE THEY’RE ALREADY BEING PAID FOR.

@Harry He’s proposing an arbitrary and one off program that favours higher earners

Is this really true? I would have thought that students from affluent families would not incur as much debts as those from average or low income families, even if they study longer. This article claims that this presumption is correct

https://www.cnbc.com/2014/03/27/1-trillion-student-loan-debt-widens-us-wealth-gap.html

and which has the additional, nasty, feature that college debt holders are disproportionately white.

Again, is this really true? This analysis reaches the exact opposite conclusion

https://www.higheredtoday.org/2018/05/21/new-analysis-reinforces-racial-disparities-student-debt/

Do you think it is flawed?

I’m proposing to put that money into universal programs (public schools) […] I don’t, frankly, know what he is, given the evidence.

This sounds too harsh a criticism to me. Like nastywoman, I take universal free education for everybody to be a core principle of democratic socialism, and I’m absolutely convinced that public goods should be universally subsidized, not mean tested (so I have a marked preference for Sanders’s plan compared to Warren’s). Whatever its flaws, I think it’s fair to say that this proposal is a real progress in that direction. Also, I’ll note again that it is much harder to actually build something than to forgive debts. Raising a tax on the wealthy to build public schools or to give Black mothers and babies the maternal and infantile care they deserve as human beings (what they would get in Kazakhstan, for instance) is a more pressing socialist policy than forgiving debts, but it is also much, much harder.

The correct response to seeing there’s a bunch of other important things Sanders could do with this money, instead of pitting them against each other, is to “yes, AND” it. So wipe out student debts? Yes, AND let’s increase funding for all schools. Yes, AND let’s massively invent in a Green New Deal-style program. Yes, AND… AND…

After all, the fact that doing all of these might not be politically possible is exactly the reason you have to “yes, AND” them. One of the biggest failures of the Obama administration, and similar centrist tinkocratics, is to think that if you start at a Serious(tm) position, then Blue Dogs or supposed Moderate Republicans will respect your proposal and help push it through. That doesn’t happen. Instead, by “yes, AND”-ing, you start high, change the nature of the conversation, and then if necessary let them bargain you lower. But don’t *start out* by going lower, that’s bad politics. We should be bold and demanding in our movement.

“But there’s a piece of me that knows what the pot looks like, and says, ‘That’s not the best use of the money’”

To be appropriately cynical about politics, what is it that a politician thinks he is buying on the campaign trail with his proposals for spending?

Votes, obviously enough. With 45 million – apparently the number of those with student loan debt – beneficiaries this looks like a highly efficient use of societal resources. Considered in that appropriately cynical manner of course and from the point of view of the Sanders campaign.

If there were actually $160 billion a year – just to make up a vaguely relevant number – that would pay to move the starting point of the FICA taxation system up from where it is, at dollar 1 of income, to full year full time minimum wage. Maintaining all the rights and accruals that go with the current payments, but without the poor having to actually make the payment. Reducing both average and marginal tax rates for the poor seems like a good idea to me. It’s not even a very new idea, the British NI system works this way. Rights accrue from about £3,000 a year of income, the NI taxation is only paid from about £8,000 a year or so (both those numbers from memory).

Might not be quite so many votes in it….

People need to work on their critical thinking.

The huge amount of professional debt overwhelms the rest. That has no implications for how much other debt there is, how it’s distributed statistically, or how it affects the lives of debtors.

Title One is aimed at a real problem and is probably underfunded. That has no implications for whether other programs should be funded.

The money for program X could give each kid in the country $1500. That has no implications for what help it could do.

Young teachers-in-training in Wisconsin have high ideals (@21). That has no implications for how people who are affected by a program should vote. (And “no implications” means “no implications.” It does not mean “people who disagree with the Wisconsin kids can of course they can vote for selfish reasons if they like.” It does not mean “people I don’t recognize as ‘needy’ have to learn to stand on their own two feet like I did.”)

The quality of discussion in these comments threads would be vastly improved if everyone simply stopped and realized that, and thought for a very long time before deciding they had something to contribute.

It is so easy to say, the problems are clustered among a small area of people, none of who, are present in the discussion, and can be addressed by giving money to small, adorable, innocent children, and without changing any existing programs, or giving help to people who don’t always seem deserving. There isn’t any obvious need, on top of that, to argue at length that any other possible program is going to be ineffectual AND immoral AND take money away from small adorable children. At least I don’t see it.

Rather than use $1+ T to pay the lenders, if be in favor of just telling them “you’ve been running a scam and now your investors loose their shirts.”

Just declare a jubilee for this debt.

Yes I know it’s a fantasy.

The problem with addressing “inequality” in the current system is, what do we mean by that? Bringing everyone to the same level, someday? Reducing the wealth of the 0.001% to that of the 5%? Raising up the poor to a decent working class level? Giving the working class a chance at comfort that was given to the previous couple of generations?

If the last of those, the fact that those generations are not currently happy about the way the system is working for them seems relevant, and how that’s supposed to be addressed by telling them “we should expect the rich to make sacrifices” isn’t at all obvious to me.

Making working class and middle-middle class schools decent has arguably been funneling kids into an indebted college experience. Telling them to suck it up so we can get more of the next generation (but not their own kids) into the same situation in twenty years . . . isn’t an attractive prospect.

@38

‘Kids will still need loans to go to school’.

Why?

Any move towards socialism, or social democracy, or ‘progressivism’ or whatever you want to call it, that doesn’t have Free Education (to post-graduate level: all the way) and Free Healthcare as two of its core demands isn’t really going to be up to much is it?

– and the comments here look a lot like when I told my mother:

”No – I don’t want to go to USC” –

– and even if ‘the whole family’- always – since generations – went to USC – and ones has to pay A TON of money for it – and it was much, much less when Grandma went –
– BUT if Grandpa -(”Jack” not ”Harry”) is willing to pay for it?!

NO!
and: NO!!
AND: NO!!!
– as actually – compared to Kindergarten-costs University Tuition does REAL damage debt-wise – and as Hidari so rightfully suggested – it might be justifiable to get into debt for life – by getting married – BUT NOT for having ”the nerve” to ask for a decent education?

And even if it is entirely ”cultural” as a French -(or a German?) never ever would up with the idea that one can stay being a ”Social Democrat” by arguing against –
RIGHT AWAY –
to forget ALL student debt!

Thx for this post. This and Matt Breunig on twitter have convinced me that student debt jubilee is, like, second-best socdem policy: it’s too regressive, it’s not especially popular, it further enables the arms race of zero-sum credentialism…

Thus it’s singular attraction must be that it is a good campaign strategy: it offers spoils to the young & educated that form the base of Bernie/warren activists, and perhaps looks good as a wedge for swing voters.

I wish the former advantage was given more attention. I think in the US socdem policy will have a unique susceptibility to becoming a patronage system rather than one that expands equality and prosperity for all.

Speaking of respectability, I suppose I should shout out to Harry’s late colleague, George Mosse, whose writing on the subject I used in a thesis some years back, and who had a lot of important things to say on the subject from a left/anti-fascist perspective, astonishingly not at all dated.

Instead, by “yes, AND”-ing, you start high, change the nature of the conversation, and then if necessary let them bargain you lower.

The results of negotiation between two parties who have full information will essentially be determined by their respective leverages, not by the “nature of the conversation”, as the UK government is discovering re:Brexit today.

@
”Actually, his plan doesn’t include making private college illegal. Or even private schools”.

It doesn’t have to –
It’s great to have private schools and Universities, where anybody – who really WANTS to pay for his – or her education – can go.

I really appreciate what you’re doing, but end up strongly disagreeing with the conclusion.

This would be more convincing if you addressed the context. We had a system where public universities were cheap or free, and student debt was far less than it is today. We then effectively removed this system and replaced it with one where individuals borrowed money, and folks on the center left argued that this was just fine because they were wealthier than the median anyhow. Fast forward a few decades. We have enormous student debt, rapid tuition rises, and a drastic drop in social mobility. We tried the technocratic center-left argument – always trying to do social engineering so only the proper sort of folks get benefits – and it was a disaster. In particular, you seem to completely dismiss the social mobility consequences of loading students from median income backgrounds with heavy debt – which the parents of their wealthier peers just pay off.

And yet the answer is always the same. If someone has a solution, come up with some other use of the money (which won’t actually happen, but is used as a weapon against change.) You see the same logic used for climate change – why worry about this distant future stuff when we could fight malaria today? Why spend on art when people are hungry?

In the case of K-12, we have plenty of poorly performing public schools with high per pupil spending. It’s therefore not at all clear that dumping money in the public schools will help. By contrast, we *know* the benefits from free tuition and debt relief, which are direct and real. Even if someone did propose spending a lot of money on K-12, we’d then see the attack that many of these schools are already rich, so of course we need some complex formula to make sure that only some schools get the money…

Enough with the technocratic noise. Universal benefits, funded by progressive taxes, and justified on their own merits.

Thanks for the thought provoking commentary everyone. I can’t say it has left me knowing what to make of this though.

I am a Robynsian limitarian. I want to see the wealthy taxed on principle (Don’t bother arguing with me on this). Wealth is political power, and massive inequality of political power is fundamentally undemocratic. I am convinced that we should argue against the primacy of wealth and private property itself, and in the process articulate a new central focus for society.

I also want to see the working classes emancipated from debt peonnage. Clearly there are many paths to this. All discussion of expanding social welfare spending inevitably begs a number of questions that I feel like we should have better answers for first:

1. “what are we spending money on now?”. Everyone knows we spend to much on the military, but a political attack on defense spending would first require a reframing of our relationship to the military, and that seems unlikely any time soon. At a best, we use military spending to put our social spending in perspective it seems.

2. ‘Who will benefit?’ This is a practical question of efficacy, but also, as others commented, it defines who will be included in the ‘public’ which supports this.

3. ‘Do they deserve it?’ As most liberals and leftists understand, this is a question best avoided if at all possible. Often irrelevant to stated goals.

4. ‘How will we pay for it?’ This is the big one. Most often raised as a bad faith cudgel, a trap to make you admit it’s impossible. I feel like a good answer to this is the crux of so many more fundamental debates. Things like why we have a federal government and taxes in the first place, and how federal spending works and its implications. The debate over MMT. I wish I could answer it more confidently.

Basically, this plan doesn’t seem so horrible that it must be opposed, nor necessarily that great or likely to achieve its stated goals, so I guess I’ll just keep holding my breath.

There are important differences between the US context and home range of social democracy.
1) In the American context, this is brilliant politics. The electorate in the US is systematically skewed to the middle and upper middle class. Giving more affluent voters a stake in social democracy was always a tactical concern in Europe, it is even more imperative in the US.
2) In the US, a much greater portion of the population is in higher ed (partly this reflects the relative lack of non-college career/technical training and in some places, the higher education system, particularly in community colleges provides this). So the college population is larger and more diverse than in Europe.
3) Higher ed can also be seen as a jobs program (though in part financed by students themselves). Many (if not most) of them will be out of the full time job market while upskilling. As structural unemployment increases, it is an in-place institution that can be tweaked to more effectively play that role (and actually produced a more trained workforce and informed citizenry to boot).

@76
“We had a system where public universities were cheap or free, and student debt was far less than it is today. We then effectively removed this system and replaced it with one where individuals borrowed money, and folks on the center left argued that this was just fine because they were wealthier than the median anyhow.”

If you want to revisit history at least tell the whole story. We had a system that was primarily funded by states and because it catered to a meaningfully smaller population of students, states could afford to subsidize much lower levels of tuition. As state finances became squeezed for all of the dozens of reasons that occurred…subsidies dropped and tuitions rose.

Throughout the 80s and 90s there were two types of loans – government loans which were almost exclusively need based (i.e. a rich person couldn’t really get one) and somewhat hard to get, and private loans which were broadly available to people deemed credit-worthy (i.e. it was a loan for a good school to a person who had access to some resources), but which did carry higher interest rates.

By the mid-2000s banks made a lot on the private loans and the government was still losing money on its federal loans because, frankly, the government wasn’t really making loans they were making grants disguised as loans and repayment was spotty. People who only borrowed private, while still endebted, didn’t end up with unwieldly balances because the banks simply wouldn’t loan that much. Perversely, the best way to get a Federal loan became to take out lots of private loans to make you look poor on paper and then the Feds would help out (my experience).

The problem ballooned however in 2010 when the Obama administration decided to punish the banks for making profitable student loans and effectively nationalized the loan making process. Now there were poor underwriting standards and no effective limits on how much a person might borrow. The newly federalized loans were still not profitable, but far more available….Federal loans outstanding went from less than $400B to $1.6 T in the 9 years since that happened. States responded to the surfeit of available Federal money by raising tuitions (and further cutting state subsidies) which they knew the Feds would back with more loans.

That’s the more detailed story of how we got here. If there is a merit to Bernie’s plan (which I still say there isn’t) is that it makes plain that the last 9 years of so called ‘loans’ were really grants in disguise which may have been the agenda in 2010 in the first place…still, it does nothing for making education more affordable – indeed, all facts would say the opposite. Throwing more money at a problem makes it more expensive, not more efficient.

If University education is to be solely/largely federally funded, the only logical way will be to nationalize the universities too (like it is in many countries)…since that’s the only way to balance the funding and the underlying cost structure. This of course won’t happen since states will never, ever, give up their schools.

@
”But maybe I don’t know enough about social democracy”.

Well? –
then perhaps – it will help to explain how Bernie got this real ”good social democratic” idea?

Like a few years ago – when we -(some Expats) met with some of our other ”Bernie-Bros” and we talked about ”the unsustainable cost explosion of education in the homeland” and the rising debt for our friends –
we told them -(our friends) that in real ”social democracies” education is FREE – AT EVERY LEVEL – and so we don’t even have to talk about any prioritizing one level above – or below – another one.

And that WE can ”totally focus” on how to get to a ”completely FREE Educational System” like in ”well-working social democracies.”

And somehow we came to the conclusion – that anybody who tries to… let’s call it ”changing the subject by playing one level of education against another one” – is either so used to the American Educational System – that he -(or she) is unable to think outside his ”box” -(of many colours) –
Or he -(or she)- tries everything NOT having to talk about FREE EDUCATION at all –
as he -(or she) does’t know enough about social democracy”?

BE-cause each time WE -(the Expats) told our friends about – what is possible in a real ”social democracy” – they said: We want that TOO –
and then WE all went to Bernie and told him – that we CAN have that too – and Bernie believed us –
and that’s why he came out with this plan.

– and@82
”If you want to revisit history at least tell the whole story”.

Please do – as the story about ”a system that was primarily funded by states and because it catered to a meaningfully smaller population of students, states could afford to subsidize much lower levels of tuition” – isn’t ”the whole story” about a system which actually has ”Profit” -(like in the US Health Care System) at it’s core.

The ”Free Universities of Social Democracies” don’t have to make money – and as we all (must) know -(from living in the homeland) – if a school – or a University – or a hospital – or your neighbour – has to – or tries to make money on US – that often ends with a lot of debt for ”the people” who depend on such ”schools – or a University – or hospitals” –

und dann haben wir den Salat!

The fraction of the population with college degrees is much larger than 5%! The stats I looked up were closer to 40% of adults, and almost 50 million people with student loan debt.

But what % have debt from law school, medical school, business school (which are the really expensive ones, I assume)?

Also, the money has already been spent. It already exists. Do you not understand how loans work? This is about whether or not that debt will be annulled, freeing up future income to be spent into the economy.

Trillions of dollars of student debt is an albatross around the neck of an entire generation of students. Your attempt to portray this as a class issue, as if only already rich people get loans and go to university, is pathetic. As if your bizarre assumption that people with a college education are automatically headed for being in the top 5% of the country. Have you just never interacted with people in the real world, um, ever? College educated people exist in all sections and walks of life of this society.

Saying “but what about regular schools” is whataboutism. Regardless, Sander’s has separate plans for those schools already.

And again, it wouldn’t be ‘spending’ 50x more money on student debt. THE MONEY HAS ALREADY BEEN SPENT. Do you not understand the difference between debt forgiveness and creating new money as part of a budget?

@Patrick

I’m saying that evaluating programs that could help a lot of suffering people based on how little it helps you due to hard choices you made 20 years ago is fucked up. It’s mean-spirited and vulgar and short-sighted, and that does not change with the number of buzzwords you pack into one short post on CT.

Harry

I think anybody who wants to achieve clarity of communication should strive to avoid using the term ‘middle class’ (except in discussions strictly limited to a circle of people who can be relied on to share the same understanding of its meaning, a characterisation which I am not confident applies to Crooked Timber commenters).

Harry there are loads of lower income people who will benefit from loan forgiveness and free tutition. Additionally imo the tutition should always have been free so this is merely paying people back for costs they never should have incurred in the first place.

Finally any argument about resources needs to take into account just how rich the US is. There is no reason why the we can’t do everything you mentioned AND forgive student loans AND provide universal healthcare.

I really recommend a few visits to some elementary and secondary schools in our inner cities, and a glance at inequalities in various measures of educational success, if you think that higher ed is the place to invest to improve the quality of education.

I do think this is true and important, and I do think supporters of the plan should confront this reality and recognize that this is a plan that can realistically narrow the inequality gap between Jared Kushner and Alexandria Ocasio-Cortez (where the names are used as metonymy for their respective standing in life at 18), but not between either of them and the average Black kid from Ferguson or the average White kid from semi-rural Kansas. Indeed, it arguably widens the second gap.

Whether narrowing the first gap at the expense of plausibly widening the second is a good idea and a progress from the current situation depends a lot on prior ideas about the make-up of structural inequalities in the American society. I take a rather radical position on that issues myself, so I start from a pretty critical position. That being said, as think that the best hope for the average kid from Ferguson and Kansas is some sort of socialism (a general strategy of public funding for universal public goods, starting with health care), as I believe that the political coalition that will bring it will unfortunately not be energized by them directly and as I believe that Sanders’s plan has the electoral potential to further that cause ideologically, I would be a supporter, if I had a choice.

All that being said, Harry, I really thing you should confront the fact that (to reiterate a point made several times by many commenters) forgetting some debts held in large part by the Department of Education and financial institutions and investing to significantly improving K12 education is not at all the same thing, in terms of practical consequences. Perhaps you think that the fact the second is vastly harder than the first is all the more reason to engage it in priority, but I don’t think it is productive to equate the two or present them as an either/or. They just don’t belong to the same plane of existence (to take an analogy, if there were a massive leak flooding your apartment that required a massive rehabbing of the plumbing system and you were also a little late to pay the bills for your kids school canteen, you wouldn’t wait until the leak has been repaired to write down the check for the canteen, even though the leak is much more important a problem, and even tough a theoretical case can be made that writing down this check has slightly decreased your ability to face the leak).

Harry, have you actually checked if Sanders isn’t separately planning to spend a crapton of money on k-12 education? The contrast of opportunity costs doesn’t work if he is planning to do that too.

I think a lot of people are confusing the purpose of higher education in this discussion, because they’re wedded to the ponzi scheme of “social mobility”. The goal of higher education should not be to make individuals wealthier, but to educate all of the population to a level where they are able to engage with modern society and its problems. As much as possible our goal should be to educate everyone to at least university undergraduate level, even if they don’t “need” it to “get on the ladder” or whatever other crappy alternative to a living wage the American right is now trying to fool you with. In that sense we shouldn’t think of undergraduate as separate from school, and should talk about k-16 education. So it should be free and properly funded; or, if not free, funded through a graduate tax type scheme which only kicks in when the education actually lifts the individual above the wealth of their peers.

Australia’s higher education loans scheme works in this way: you only pay it back when your salary goes above a certain level, and the debt only increases with inflation. A program like this is basically a graduate tax. A debt jubilee for American students followed by a shift to a graduate tax system would solve a lot of the problems and ensure all that money Americans are currently putting into the pockets of loan sharks actually went into the real economy. Why waste government money on these scoundrels? Just expropriate it.

And given that Sanders isn’t going to win the primary and won’t get a single policy through the Senate, does it matter?

A number of posters have suggested allowing student loans to be dischargeable in bankruptcy. There are clear benefits to this approach. It avoids some of the moral hazard objections as bankruptcy carries its own penalties. It will not be easily available to high-earning professionals. It would be a continuing benefit rather than a one-off for current borrowers.

The ability to discharge student loans would also provide a benefit without actually requiring going bankrupt. The threat of bankruptcy would allow debtors to negotiate repayment with creditors, including reductions in principle. Right now creditors have no reason to negotiate repayment terms or amounts.

Making student loans dischargeable in bankruptcy might also put the brakes on for-profit predators encouraging students to take on debt for worthless programs and degrees. Many of these school exist only for milking loan programs. I’d be happy with total loan forgiveness for these schools.

faustusnotes @100

The contrast of opportunity costs doesn’t work if he is planning to do that too.

As several commenters have pointed out, this is not a classic case of trade-offs or opportunity cost. As Z says @98, it is not a question of either/or. It’s a question of political priorities, of where one wants to spend political capital, and also a philosophical/ideological question of whom one wants to help and who one thinks most needs help, and why.

In the (unlikely) event that Congress decided, under a Sanders presidency or any other, to forgive all student loan debt, the 1.6 trillion cd be generated prob w.o too much difficulty — see earlier comments on the analogy with ‘quantitative easing’. It’s true that 1.6 tril means a lot of additional borrowing via selling of govt notes (T bills), but it wd be unlikely, I suspect, to have a significant adverse effect on the economy; might even, as some suggested above, have a positive effect under certain circumstances. Other things, incl increased funding for K – 12, wd not be precluded on economic grounds by this.

The real question, then, is one of judging where political effort and political “capital” is best spent, a question on which reasonable (and generally like-minded on most issues) people can differ. As a matter strictly of *policy*, it is more important, and more egalitarian, to improve public K – 12 education esp. in those (impoverished) areas where it is failing students most egregiously. An increased push for more (voluntary, since that’s all that’s usu legally feasible, esp where cross-jurisdictional lines are involved) urban-to-suburban (and vice-versa) transfer programs (“busing”) is also indicated, though it faces daunting political obstacles.

That said, as a matter purely of *electoral politics* in a presidential campaign, Sanders’ proposal makes some sense, and if he were to add some proposals about K-12 along the lines suggested, I’m not sure why someone cd not support both those proposals *and* the cancellation of (most) student loan debt, if one were inclined to support the latter anyway.

At the risk of sounding more weary, for lack of a better word, than I perhaps am, will close w a reminder that politics, esp in a pres. election year, is carried on w/in the constraints of the parochial, again for lack of a better word. One small recent example: Nancy Pelosi, expressing justifiable outrage about treatment of migrant children on the US/Mexico border, said there is a “sacred moral obligation” — or words to that effect — to help vulnerable children and make sure they are not ill-treated and deprived of basic needs, etc. But Pelosi did not mean vulnerable children *everywhere* — she meant children on the country’s borders or w.in the country itself. I’ve never heard Pelosi say, for instance, that “we” have a moral obligation to help, for instance, the children in the state of Bihar in India who have been dying recently of a mysterious illness (see Joanna Slater, “Nearly 100 Children in India Have Died of an Illness of Uncertain Origins,” Wash Post, 18 June 2019, hard-copy edition, p. A12). Or, to broaden the point, at-risk and suffering children in the world as a whole. Maybe Pelosi thinks we have this kind of obligation and maybe she doesn’t, but it’s prob not something she (or any other American politician) is going to call a news conference specifically to address. That’s not the way politics works, esp. in a pres. election year. The parochial and the national still trump (pun intended) all other matters.

– and as the question was:
”what could you do with $1.6 trillion”?

What’s about – finally – buying everybody who is teaching American kids – a ticket for some kind of Seminar in a modern European Social Democracy in order to teach American teachers -(and especially University Profs.) how this ”social democracy thing” works –
without any student loans or debts?

– and it won’t help much -(Mr. Harry)
not to post my comments –
as after firstly your criticism of the Warren plan and now Bernies plan –
it just doesn’t work anymore to tell the readers that both of these plans aren’t really ”about free public college”
as you really don’t have to address ”free public college separately” –
as it is all part of the Warren-Bernie plans –
and no effort to pivot to some argument about
”people who think that free public college would result in students not being in debt” will work either –
as ”the cost of living -(and especially rent) for sure has contributed more to increased debt levels than increased tuition –

But that’s not an argument against debt forgiveness of student loans.

It’s actually is an argument FOR debt forgiveness of student loans – as you might learn from ”social democrats” that they just don’t prioritize between ”cost of living” and ”cost of educating” either – or try to play the one against the other.

It’s over!

I think anybody who wants to achieve clarity of communication should strive to avoid using the term ‘middle class’

No, everyone should use it in the correct (non-USian) sense: people with sufficient economic or cultural capital or workplace authority to take them out of the working class but not enough to place them in the capitalist class.

There are two separate questions. First, is student debt forgiveness (SDF) good political policy? Second, what are the economic consequences of loan forgiveness?

SLF would, as Trader Joe remarks, be kind of bad, but not, I think, terrible, if there were no other reforms, setting up kind of a perverse incentive to borrow expecting forgiveness. But how bad is this really? There are at least some limits on the amount that can be borrowed directly from the feds: it’s not possible to borrow even a single year full tuition at Harvard with DoE loans.

And yes, there is a “magic money fairy that creates money without diverting it from some other source.” It’s called the Federal Reserve.

As far as private debt goes, just because we forgive even private debt today does not mean we must forgive it later, especially if there is substantial reformation of predatory lending. It’s an obvious fix to make at private student loans dischargeable in bankruptcy and have the existing federal loans converted to grants.

I don’t really care that rich people’s debt might be cancelled. I am firmly convinced by the universalist argument: make benefits universal and not means-tested, and take care of inequality with taxation. If rich people get a $50K benefit but their taxes go up by $100K, well, I can live with that.

‘Nancy Pelosi, expressing justifiable outrage about treatment of migrant children on the US/Mexico border, said there is a “sacred moral obligation” — or words to that effect — to help vulnerable children and make sure they are not ill-treated and deprived of basic needs, etc. But Pelosi did not mean vulnerable children *everywhere* — she meant children on the country’s borders or w.in the country itself. I’ve never heard Pelosi say, for instance, that “we” have a moral obligation to help, for instance, the children in the state of Bihar in India who have been dying recently of a mysterious illness’.

Nor did Pelosi state, or imply, or, for that matter, mean, that there is a ‘sacred duty’ to help children killed by American bombs in Syria, Afghanistan, Iraq, Libya etc. Indeed, were she pushed, she would probably admit that she believes there is a ‘sacred duty’ to keep on killing them. In this, she is in agreement with all American post-FDR Presidents.

”People who suggest that ”people who still are in trouble get to file for bankruptcy” must really hate American students”?

– which could finally bring US to some utmost important point of BernieWarrens Plans.

It’s about time that Americans – who make money on the backs of other Americans with Health Care – Education or Housing – HAVE to learn that there are things in life – were NO American should try to make all oo this dough on other Americans backs.

BE-cause ”Health Care – Education and ”the right for an acceptable shelter” should be

”NOT FOR PROFIT”!

114 I have a longstanding practice of not posting comments till I am able to read and understand them

Huh? You understood 29, 44, 51, 90? Really?

You understood (29) “printing $1.6T and giving it to the banks – that is, quantitative easing?” You understood (51) “the govt in this case prints money and then takes the borrowing route and sells Treasury bonds to raise that money?” I am skeptical.

You understood (44) “BECAUSE THEY’RE ALREADY BEING PAID FOR” and (90) “THE MONEY HAS ALREADY BEEN SPENT.” Not the meaning of the words, but the underlying “government spending on transfers is from Mars, government spending on non-transfers is from Venus, and anyone who doesn’t see this is an idiot” point? I am skeptical. Wait, I meant to say I AM SKEPTICAL.

On electoral strategy — I completely agree that this is a good policy for winning the primary

I am skeptical of this too. According to 538, in the past three months Warren narrowed her gap vs. Sanders from 6-21 to 12-16. This could just be a try-something move on Bernie’s part to try and halt that slide.

You can see the appeal; we all know someone with student loan debt, why not do something nice for someone? But at the same time it isn’t as if Warren won’t get a chance to use this to differentiate herself from Bernie in a positive way, since her plan obviously is both more realistic and less flawed. (Something like Warren’s plan, perhaps watered down, could actually pass a Democrat-controlled Congress, I would think).

https://fivethirtyeight.com/features/bulletpoint-two-meaningful-things-have-happened-in-the-democratic-primary-so-far/

@
”I find it hard to understand him/her, and can’t tell most of the time what point is being made”.

Am I allowed to say – that I suspect that you – or actually ”y’all” – understand it always right away?
As didn’t y’all went to… ”University”? – and after ”University” – and especially by studying ”Philosophy” gnomic statements are the easiest to understand?

It’s not like I’m writing like this Kant-dude who wrote this thing about the ”crooked timber” and all of that…