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> Forgiving student loans with such a broad stroke would create tremendous moral hazard. Individuals who scrimped for years, forgoing dinners with friends and v

> Forgiving student loans with such a broad stroke would create tremendous moral hazard. Individuals who scrimped for years, forgoing dinners with friends and vacations and fancy phones to pay off their student loans, would effectively feel ripped off knowing that had they only been more profligate, the federal government would have wiped away all of their debt. Those who were much less careful about their spending patterns, on the other hand, would feel vindicated. This line of reasoning is nonsense. Paying off tens of thousands of dollars of loans is much more about finding a decently salaried job than it is about holding onto your phone for an extra two years. > In addition, it would, in effect, mean a huge injection into the higher education racket that would encourage colleges and universities to raise tuition even higher. I do agree with this. I think the strongest argument that debt cancellation should be done from the legislative branch is that it needs to be coupled with legislation to prevent the future generation from becoming over-indebted in the first place, rather than leaving incentives as-is. > On top of this, for a Democratic Party that likes to present itself as the party of the worker, it would be a tremendous wealth transfer to the elites. College graduates tend to come from wealthier families and tend to be more well off and connected. A recent Brookings Institution analysis of Federal Reserve data found: “The highest-income 40% of households (those with incomes above $74,000) owe almost 60% of the outstanding education debt and make almost three-quarters of the payments. The lowest-income 40% of households hold just under 20 percent of the outstanding debt and make only 10% of the payments.” It's a bit disingenuous to call this "elites" when we're talking about actually 40% of the country (per the articles' numbers), but there's some truth here that the top 40% of households certainly have more stability and safety net to help their indebted children. So let's call cancelling student debt what it is: a bailout mostly for the middle and upper-middle class. > It would also be quite the spectacle, after years of blasting Trump for executive overreach and calling for more bipartisanship, if Biden came right out of the gate with such an extraordinary power grab. I feel like this line of discourse needs to die. Every president in my memory has been "blasted" for executive overreach. The tools to actually prevent executive overreach belong to the legislative branch, so why are we blaming executives for trying to execute on their agenda?

jakelazaroff 6y ago
There’s a different way of looking at the impact on households of different income levels: how much debt do they have relative to their income? Broadly speaking, that top 40% pays back more than their share of the debt. That tells me that people in that bracket pay it off relatively quickly and are replaced with new debtors, whereas the bottom 60% takes significantly longer to pay off their debt. I paid my loans off about four or five years after I graduated. Forgiving my loans would have been nice but not life changing. But if you’re a family in that lower 40% bracket who struggles to pay your loans off for decades, forgiveness would impact your life more — even if the amount of money was less in absolute terms.

jakelazaroff 6y ago

There’s a different way of looking at the impact on households of different income levels: how much debt do they have relative to their income? Broadly speaking, that top 40% pays back more than their share of the debt. That tells me that people in that bracket pay it off relatively quickly and are replaced with new debtors, whereas the bottom 60% takes significantly longer to pay off their debt. I paid my loans off about four or five years after I graduated. Forgiving my loans would have been nice but not life changing. But if you’re a family in that lower 40% bracket who struggles to pay your loans off for decades, forgiveness would impact your life more — even if the amount of money was less in absolute terms.