Waiting until the economy hemorrhaged and adding means testing on loan forgiveness was the equivalent of shooting yourself in the foot at the starting line. If they did this early pandemic no one would've batted an eye as govt was printing money wildly. Adding now that there is means testing excluding tens of millions from forgiveness makes it unpopular with voters as well.
> Adding now that there is means testing excluding tens of millions from forgiveness makes it unpopular with voters as well.
Did the means testing become significantly more strict than initially proposed? I thought it was yearly income of 125k (individual) or 250k (household). The reason I ask is I'm not even sure if there are 10s of millions of hits for that let alone 10s of millions of hits for that that were also interested in getting rid of their student loan debt and then miffed. Doubly surprised this had any significant impact on how many voters supported the plan. But it'd all make a lot more sense if those numbers since dropped quite a bit.
Debt forgiveness isn't printing money, it's destroying money. Remember, someone holds those loans on the asset side of their ledger. The money was "printed" when the loan was originated.
Here's a simple example. Suppose that I loan you $20. Then later I say, you know what, don't worry about it, your debt to me is forgiven. Do I have to "print" $20 to do that? No, of course not. Do you have to somehow come up with $20? Also obviously not. My net worth decreases by $20, and yours stays constant. Clearly the total supply of financial assets has been reduced, not increased.
When the Feds create a loan, unless it's backed by a bond, they print the money they give to you. (They are masters of the money supply, so they can and do print it.) When you pay back that debt, it's "destroyed" and removed from circulation. If they forgive your debt, it won't be destroyed anymore, so the money that was given was effectively printed forever and won't leave circulation.
Because as you rightly observe the Congress and its various creatures are masters of the US dollar denominated money supply, it's meaningless to talk of them as having any kind of financial net worth in the way that an entity that isn't a currency issuer has. Congress's "debt" in no way constrains their operational spending ability as it does for those parties who can't create money de novo. Thus, as I already said, the money was effectively printed when they originated the loan, and no new money is created when they forgive it. You're confusing a lack of deflation with further inflation.
As for "backing by a bond," clearly you're aware that's just a shell game, because the Fed will issue and front the Primary Dealers whatever reserves they need to buy whatever bonds the Treasury issues. It's operationally impossible for a treasury auction to fail because Congress, via the Fed, backstops it using their constitutional money creating power. It's a kind of fig leaf to hide the fact that in the end it's all just naked money creation.
That's not to say that a sovereign currency issuer doesn't face real limits on their spending[1] power, but that would be a rather lengthy digression and I'm fairly certain you understand at least the gist of it anyhow.
[1] But not money creating power! Nobody denies that Zimbabwe and Weimar Germany were able to create money, they really truly did. It just had greatly diminished purchasing power.
> My net worth decreases by $20, and yours stays constant.
The above is not correct. When I forgive your $20 loan, my net worth decreases by $20, and yours increases by $20.
That's accounting 101.
The $20 debt is your liability and my asset. It contributes –$20 (negative $20) to your net worth, until it is forgiven or settled. Then it stops contributing –$20. When it was lent in the first place, you also gained a +$20 cash asset at the time, but that's not relevant at the time of forgiveness as you aren't paying it back .
(The question of whether money is "printed" is subtler. As the comment I'm replying to says, we usually say government or bank issued loans are "printed" when they are lent out in the first place. It'd be a strange extension to the metaphor to call the same money "printed" for a second time when forgiven.)
> but that's not relevant at the time of forgiveness as you aren't paying it back
You're correct, I oversimplified to the point of error. This is the salient point though. No money is created or "printed" as part of the operation of forgiving a debt.
Early in the pandemic Biden wasn't in charge and republicans wouldn't do that. They wanted to take away things like health insurance as an option. Maybe the dems could have gotten into one of those covid stimulus bills but I doubt it.
I wish it had passed but all the things that did pass were by a tiny wisp of barely there support. Via Sinema and Manchin, who ended other obviously good things. I wish it had passed congress but it probably wouldn't have. Get rid of the filibuster, get rid or Manchin and Sinema and we could have passed it into law, but the supreme court looks to reverse the loan forgiveness.
Weird question: What would happen if the president ordered the destruction of all records of the loans, payments, balances and other paperwork in federal hands (edit: I should have been specific and said I meant student loans, not just everything...)? As POTUS that seems like something he is free to do right? And it would make it all but impossible to actually enforce any existing debts right? You cannot sue someone if you don't have a contract or a record of payments etc.
Indeed a weird question. It is reminiscent of the destruction of title-deeds and charters in the French Revolution.
> They turned upon the châteaux in order to destroy the charterrooms, the lists and the title-deeds; and houses were burned down if the masters did not relinquish with a good grace the feudal rights recorded in the charters, the rolls and the rest.
> All the title-deeds held by the Abbey of the Bernardins in the neighbouring communes were carried off.
> They did them no harm but the registers and title-deeds of feudal landlordism they never spared. They burned them, after compelling the lord to swear that he would relinquish his rights.
This isn't something that government's usually do, and modern tech infrastructure and practices specifically attempt to prevent with backups, access control, and even buddy systems (in the realm of finance - though the technical name of this practice escapes me at the moment).
All this talk about the government forgiving student loans is disingenuous if the government is still doing them business as usual, otherwise, we'll be back in the same place in a generation. The data is in: current student loan policy is terrible and unsustainable.
> Forgiving existing student loans is not fixing the issue, it’s just reducing the impact for now with a 100% certainty it will come back.
What if you did one time forgiveness while also reforming existing discharge and repayment systems so as to prevent the problem solved by one-time forgiveness from recurring?
Asking because that's what the current admin has been doing through executive action, its just all the media attention has been on forgiveness.
> What if you did one time forgiveness while also reforming existing discharge and repayment systems so as to prevent the problem solved by one-time forgiveness from recurring?
You mean what if you did wrap the leaking gas main with tape now, but also put in place a more efficient system to wrap it again next time it needs it?
Sure, that's a better band aid.
The better solution would be to not have high education that it so damn expensive, and to not allow predatory lending for it that puts young people into crushing debt forever.
Australia used to have free university, now it has an interest free loan from the government. You get loaned something like $5k/year for tuition[1], and for the rest of your life you pay it back as a few extra percent income tax. If you never earn over a certain threshold (maybe you're an artist earning not much, maybe you're a high power lawyer that wants to donate your time), you never pay it back, and that's how it's designed to work. (Current threshold is $55k/year).
If a little country like Australia can afford to make that system work, I'm confident the richest country that has ever existed can too.
[1] students that need more money for housing/food/etc get an allowance from the government for that. It's not a loan, you don't pay it back. Right now it's a touch over $1k/month for a full time student living away from home.
https://www.servicesaustralia.gov.au/how-much-youth-allowanc...
I naively assume that these for profit schools would inflate their tuitions to take this into account. The students won’t care if tuition triples, if it will be paid for.
The trick some schools have been doing (I think so far only law schools?) is that they raise tuition and then give annual kickbacks to graduates until loan forgiveness kicks in. For the school and students, it's a win/win
Getting votes by appealing to pocketbooks is par for the course of politics since forever. Republicans might usually pick up taxes as their chosen tool but it is the same.
The article says the law only allows this due to the "state of emergency" from COVID. Unless they change that law, how does it become possible to constantly pass relief bills without extending the COVID state of emergency indefinitely?
I don’t see a particular reason why the COVID state of emergency can’t be extended indefinitely. We’ve been in a state of emergency from 9/11 for practically my entire life.
> All this talk about the government forgiving student loans is disingenuous if the government is still doing them business as usual.
They...aren't. I mean, while the rules on issuing them haven’t changed, the rules on repaying them have in ways which are designed to avoid the problem prompting the broad, one-time relief. Attention on the one-time forgiveness program seems to have distracted from non-one-time changes to:
(1) Alter the calculation of disposable income for income based repayment to reduce the income considered disposable, and reduce the required share of disposable income paid under income driven repayment plans (which have automatic forgiveness after a set # of payments.)
(2) process reforms to public service loan forgiveness to expand practical eligibility,
(3) limitations on capitalizing interest for student loans,
(4) reforms to how the executive branch handles undue hardship claims in bankruptcy so that their are clear criteria under which DoJ will stipulate to undue hardship, making it less cumbersome to secure discharge in bankruptcy,
(5) expanded eligibility and streamlined process for Borrower Defense to Repayment for those affected by deceit/fraud by schools,
(6) Closed-School Discharges for those impacted by schools closing during attendance,
(7) Streamlined process for forgiveness in the Total and Permanent Disability program.
As someone who made great sacrifices, to pay off my loans immediately after graduation. I could not be more vexxed at the current administrations policy on this, over any policy executed with executive authority in my life time. I fully paid off my loans just before covid started.
I received pell grants, I worked full time while in school. I drove, maintained a 15 year old car, and live with roomates.
Additionally the amount of sound clips and articles, I hear because of this policy in America calling for more relieve. Makes me far more conservative than I would have ever been.
> Why should poor fast food workers pay student loans for privileged liberal arts majors?
Weird anti liberal-arts slander aside, the vast majority of people unable to pay off their student loans - most of whom have been trying to do so - are far closer to the former implied end of the socioeconomic spectrum than the latter.
Not that it actually matters - your question is disingenuous to begin with.
The average salary of a liberal arts major is over $50,000. That's $20,000 higher than a high school graduate. Why should the latter pay for the former?
All of this nonsense is a distraction to prevent people from noticing that the capital holding class is exploiting all workers for their labor whether they have degrees or not. College could be provided for citizens for free but we don't have that because the capital owning class has workers all pointing fingers at each other squabbling over pennies
> Why should poor fast food workers pay student loans for privileged liberal arts majors?
Poor fast food workers almost certainly pay zero-to-negative net income tax (negative potential becaue of EITC), so…they wouldn’t pay forgiveness for anyone.
In a world where the Fed both had the capacity and the desire to selectively exclude the effects of particular fiscal actions from its monetary policy calculations and, specifically, to do so for student loan forgiveness, this might actually be a sensible question.
In my experience approaching 4 decades, the answer is that the rich get more of it. The particular question about money doesn't seem to matter much, the answer is the same.
> Coincidentally, policies that make things “get better” just happen to be promoted and supported by the political party that I support.
I don’t think that is coincidental. Why would someone support a political party besides thinking that its policies generally were the ones that make things “get better” of the available alternatives?
I understand where that's coming from but student loan debt is not a major contributor to the national debt. If we wanted to fix that, we need to roll back the Republican tax cuts which nuked the balanced budget we had around the turn of the century (this is especially important to the solvency of Social Security).
I would also say that while I sympathize with your position kids today are looking at even larger debts and wider housing deficits. Debt forgiveness won't solve everything there but I'd put the blame on the Congress rather than the people trying to do something to help.
> I also left out a rant on the deficit the US has.
The deficit, at this level, is unimportant. The US will not retire, therefore there is no end date for the payment of its debts. The inflation it is experiencing at the moment is eating away at the base of the debt level while the interest rate is still far below the amount of inflation.
Debt forgiveness is a necessity for a healthy society. When, how, how much, and for whom are the real questions to be asked.
In this case, it's the HOW that is problematic. In a sane world, all scorn would be heaped on the person that promised debt forgiveness knowing they didn't have the power to do so, for personal political gain, and willing to attempt to set a very dangerous precedent of limitless spending with the stroke of a pen by any president.
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[ 3.2 ms ] story [ 96.5 ms ] threadDid the means testing become significantly more strict than initially proposed? I thought it was yearly income of 125k (individual) or 250k (household). The reason I ask is I'm not even sure if there are 10s of millions of hits for that let alone 10s of millions of hits for that that were also interested in getting rid of their student loan debt and then miffed. Doubly surprised this had any significant impact on how many voters supported the plan. But it'd all make a lot more sense if those numbers since dropped quite a bit.
Here's a simple example. Suppose that I loan you $20. Then later I say, you know what, don't worry about it, your debt to me is forgiven. Do I have to "print" $20 to do that? No, of course not. Do you have to somehow come up with $20? Also obviously not. My net worth decreases by $20, and yours stays constant. Clearly the total supply of financial assets has been reduced, not increased.
As for "backing by a bond," clearly you're aware that's just a shell game, because the Fed will issue and front the Primary Dealers whatever reserves they need to buy whatever bonds the Treasury issues. It's operationally impossible for a treasury auction to fail because Congress, via the Fed, backstops it using their constitutional money creating power. It's a kind of fig leaf to hide the fact that in the end it's all just naked money creation.
That's not to say that a sovereign currency issuer doesn't face real limits on their spending[1] power, but that would be a rather lengthy digression and I'm fairly certain you understand at least the gist of it anyhow.
[1] But not money creating power! Nobody denies that Zimbabwe and Weimar Germany were able to create money, they really truly did. It just had greatly diminished purchasing power.
The above is not correct. When I forgive your $20 loan, my net worth decreases by $20, and yours increases by $20.
That's accounting 101.
The $20 debt is your liability and my asset. It contributes –$20 (negative $20) to your net worth, until it is forgiven or settled. Then it stops contributing –$20. When it was lent in the first place, you also gained a +$20 cash asset at the time, but that's not relevant at the time of forgiveness as you aren't paying it back .
(The question of whether money is "printed" is subtler. As the comment I'm replying to says, we usually say government or bank issued loans are "printed" when they are lent out in the first place. It'd be a strange extension to the metaphor to call the same money "printed" for a second time when forgiven.)
You're correct, I oversimplified to the point of error. This is the salient point though. No money is created or "printed" as part of the operation of forgiving a debt.
> They turned upon the châteaux in order to destroy the charterrooms, the lists and the title-deeds; and houses were burned down if the masters did not relinquish with a good grace the feudal rights recorded in the charters, the rolls and the rest.
> All the title-deeds held by the Abbey of the Bernardins in the neighbouring communes were carried off.
> They did them no harm but the registers and title-deeds of feudal landlordism they never spared. They burned them, after compelling the lord to swear that he would relinquish his rights.
This isn't something that government's usually do, and modern tech infrastructure and practices specifically attempt to prevent with backups, access control, and even buddy systems (in the realm of finance - though the technical name of this practice escapes me at the moment).
From Kropotkin, P. (1927). The Great French Revolution, 1789-1793 (N. F. Dryhurst, Trans.) New York: Vanguard Printings. (Original work published 1909) CHAPTER XVI THE PEASANT RISING (http://dwardmac.pitzer.edu/Anarchist_Archives/kropotkin/fren...)
No, destroying records that are required to be kept under federal law is not something the President is allowed to do.
Rather than rethinking the badly designed severely leaking joint in a gas main, this is just wrapping some tape around the joint.
You can band aid symptoms all you like, but real change and improvement means fixing the source of the issue
What if you did one time forgiveness while also reforming existing discharge and repayment systems so as to prevent the problem solved by one-time forgiveness from recurring?
Asking because that's what the current admin has been doing through executive action, its just all the media attention has been on forgiveness.
You mean what if you did wrap the leaking gas main with tape now, but also put in place a more efficient system to wrap it again next time it needs it?
Sure, that's a better band aid.
The better solution would be to not have high education that it so damn expensive, and to not allow predatory lending for it that puts young people into crushing debt forever.
Australia used to have free university, now it has an interest free loan from the government. You get loaned something like $5k/year for tuition[1], and for the rest of your life you pay it back as a few extra percent income tax. If you never earn over a certain threshold (maybe you're an artist earning not much, maybe you're a high power lawyer that wants to donate your time), you never pay it back, and that's how it's designed to work. (Current threshold is $55k/year).
If a little country like Australia can afford to make that system work, I'm confident the richest country that has ever existed can too.
[1] students that need more money for housing/food/etc get an allowance from the government for that. It's not a loan, you don't pay it back. Right now it's a touch over $1k/month for a full time student living away from home. https://www.servicesaustralia.gov.au/how-much-youth-allowanc...
That way they get to say, "Vote for us and save money, don't and the Republicans will drain you dry."
They...aren't. I mean, while the rules on issuing them haven’t changed, the rules on repaying them have in ways which are designed to avoid the problem prompting the broad, one-time relief. Attention on the one-time forgiveness program seems to have distracted from non-one-time changes to:
(1) Alter the calculation of disposable income for income based repayment to reduce the income considered disposable, and reduce the required share of disposable income paid under income driven repayment plans (which have automatic forgiveness after a set # of payments.)
(2) process reforms to public service loan forgiveness to expand practical eligibility,
(3) limitations on capitalizing interest for student loans,
(4) reforms to how the executive branch handles undue hardship claims in bankruptcy so that their are clear criteria under which DoJ will stipulate to undue hardship, making it less cumbersome to secure discharge in bankruptcy,
(5) expanded eligibility and streamlined process for Borrower Defense to Repayment for those affected by deceit/fraud by schools,
(6) Closed-School Discharges for those impacted by schools closing during attendance,
(7) Streamlined process for forgiveness in the Total and Permanent Disability program.
As someone who made great sacrifices, to pay off my loans immediately after graduation. I could not be more vexxed at the current administrations policy on this, over any policy executed with executive authority in my life time. I fully paid off my loans just before covid started.
I received pell grants, I worked full time while in school. I drove, maintained a 15 year old car, and live with roomates.
Additionally the amount of sound clips and articles, I hear because of this policy in America calling for more relieve. Makes me far more conservative than I would have ever been.
I also left out a rant on the deficit the US has.
Weird anti liberal-arts slander aside, the vast majority of people unable to pay off their student loans - most of whom have been trying to do so - are far closer to the former implied end of the socioeconomic spectrum than the latter.
Not that it actually matters - your question is disingenuous to begin with.
Poor fast food workers almost certainly pay zero-to-negative net income tax (negative potential becaue of EITC), so…they wouldn’t pay forgiveness for anyone.
In a world where the Fed both had the capacity and the desire to selectively exclude the effects of particular fiscal actions from its monetary policy calculations and, specifically, to do so for student loan forgiveness, this might actually be a sensible question.
I don’t think that is coincidental. Why would someone support a political party besides thinking that its policies generally were the ones that make things “get better” of the available alternatives?
I would also say that while I sympathize with your position kids today are looking at even larger debts and wider housing deficits. Debt forgiveness won't solve everything there but I'd put the blame on the Congress rather than the people trying to do something to help.
The deficit, at this level, is unimportant. The US will not retire, therefore there is no end date for the payment of its debts. The inflation it is experiencing at the moment is eating away at the base of the debt level while the interest rate is still far below the amount of inflation.
In this case, it's the HOW that is problematic. In a sane world, all scorn would be heaped on the person that promised debt forgiveness knowing they didn't have the power to do so, for personal political gain, and willing to attempt to set a very dangerous precedent of limitless spending with the stroke of a pen by any president.