8 ms·

Student loan forgiveness is regressive measured by income, education, or wealth

30 points by brimnes 5y ago

dv_dt 5y ago
I think the best context to this is this earlier discussion of similar analysis: https://www.currentaffairs.org/2019/06/is-student-debt-cancellation-regressive-no https://www.currentaffairs.org/2019/06/is-student-debt-cance...
- twoodfin 5y ago
  Two points on that discussion: - AFAICT, the argument that a massive loan forgiveness would not be regressive rests entirely on excluding from the analysis low-income members of the 25-40yo cohort with no student debt. Sure, that fraction may be smaller than in the past, but it’s hard to see how discounting a bunch of poor folks who would see $0 benefit from this expenditure is intellectually honest. - It’s amusing to see a left-wing analysis complain about policy benefits being described in absolute dollar amounts when it’s a doctor making $250k having $50k of his medical school loans forgiven. As I recall, every tax cut debate of the last 20 years has featured charts in absolute amounts showing the tens of thousands of dollars the average 1%’er would save, not the relatively small fraction of income that represented.
  - dv_dt 5y ago
    The situation is an entire generation of kids from one point forward were systematically misled about the sure thing security of the benefits of taking a student loan investment vehicle in order to secure their education. When the financial sector was misled about the same regarding "secure" mortgage backed securities in 2008 they were completely bailed out - despite being the sophisticated investors that should have known better. To allow the same for entire generations of students affects our society - causing declining birth rates, poorer health outcomes, poorer life quality. And why? To enforce fiscal discipline that we have not enforced even on sophisticated actors that systemically made a poor choice?
    - twoodfin 5y ago
      None of that speaks to whether the proposed $50k forgiveness is a regressive policy relative to other potential uses of several hundred billion dollars.
      - zarzavat 5y ago
        You can say that about anything. Fixing streets is regressive, it only benefits people with cars. Therefore we should not fix streets. It’s laughable to call student loan forgiveness “regressive”. The word “regressive” is supposed to be used for policies that benefit the wealthy people more than average people, not for policies that benefit average people more than low income people.
        nate_meurer 5y ago
        You have inadvertently undermined your own argument using a perfect example. One of the most effective arguments in favor of gas taxes and road tolls is to mitigate the regressive nature of universal taxation for road building and maintenance. Because yes, "fixing the streets" is indeed a regressive tax burden for people who can't afford a car. > not for policies that benefit average people more than low income people. According to whom? And are you really satisfied to merely debate semantics?
        zarzavat 5y ago
        I don’t accept that view of how taxation works. Taxes are levied to the extent that they are tolerated, and expenditure is made to the extent that it is demanded. Both are subject to independent political processes. Imagine for the sake of argument that there was a bumper year for vehicle / fuel tax and the tax generated multiplies more revenue than expected. Would the money be spent on diamond encrusted highways or would it instead be spent on other areas that are more in need? Cars are taxed because they can be.
        salawat 5y ago
        What is the "average person" to a "low income person" if not, relatively speaking, wealthier? You really can't have that both ways. Unless your intent is to partition by +/- orders of magnitude of relative wealth. In that case, we're starting to get into equal protection under the law violation territory.
  - Tanjreeve 5y ago
    I think this is post hoc wrapping usury and massive information asymetry in 'some progressiver than thou' language. - if it's about taxing some qualitative value of education then it should be a graduate tax applied equally to everyone with tertiary education. I'd be curious how politicans would manage policies on education and taxes on this value when they are paying it too - if it's not about the qualitative value but about the income, then it should be an income tax. - if it can't be discharged through normal procedures of bankruptcy and terms are rewritten by politicians then it's not 'just a loan' either. In the absence of any of these then these are largely generation taxes in terms of how they fall.
    - twoodfin 5y ago
      It’s really difficult to consider federal student loans as “usurious”. The interest rate is fixed well below market rates for similar unsecured loans. There are numerous income-based repayment & forgiveness schemes that for many borrowers will represent a negative effective interest rate. And no one has had to make any payments on these loans at all for almost two years. It’s also not at all obvious to me how making such loans dischargeable in bankruptcy would actually help borrowers, other than creating a really nice dodge for recent graduates of Harvard Law.
      - Tanjreeve 5y ago
        That's not exactly a ringing endorsement of the system If it's relying on pandemic fiscal policy and/or patchworks of different schemes many operating on political whims to negate fundamental dysfunctional behaviour. The argument for bringing student loans back into line with normal debt is less to do with poverty and more to do with not creating a system that incentivises racking up the price as much as possible and letting debt (and bailouts) patch up the difference when it all falls apart and the product doesn't actually fulfill any of its sales pitch and the price goes up far beyond what any reasonable income expectations can sustain. If the system is fixed for graduates of Harvard law then I don't think that's skin off anyone elses teeth. Bankruptcy is not exactly an easy route into legal practice so I think you're being a bit fixated on a v small edge case.
deleted 5y ago
[deleted]
brunellus 5y ago
There’s no need to measure anything. The problem with student loans is qualitative. Banks are allowed to make unsecured loans and the borrowers can’t usefully declare bankruptcy. Colleges have every reason to raise prices and lenders have no skin in the game. It isn’t any more complicated, and no amount of data analysis can possibly refute this.
- twoodfin 5y ago
  It hasn’t been “banks” for a decade: Student loans today are overwhelmingly supplied directly by the federal Department of Education. That’s why a huge jubilee is even plausible.
  - brunellus 5y ago
    My original argument still stands. And the government was perfectly capable of bailing out private companies at the end of Bush Jr’s second term.
- syki 5y ago
  If data showed that at regional state universities and community colleges the rise in tuition corresponded with the decrease in public funding per student then you wouldn’t believe it? Or that such data would mean nothing to you? Consider the linked article and keep in mind that enrollment in higher Ed has declined since 2008. https://www.cbpp.org/research/state-budget-and-tax/state-higher-education-funding-cuts-have-pushed-costs-to-students https://www.cbpp.org/research/state-budget-and-tax/state-hig...
  - brunellus 5y ago
    It’s a good question. I would be interested to know which economic forces drove the price changes. I suspect that prices could still increase even in spite of public funding decreases due to the point in my original post. But to me, all of these side effects can be thought of as fruit from a poisonous tree, and thus unjustified.
- anm89 5y ago
tamaharbor 5y ago
I have always paid all of my debts, including student loans. I think it is quite unfair that some will get off scot-free. What lesson does that teach?
- syki 5y ago
  Mathew 20:13 “But he answered one of them, ‘I am not being unfair to you, friend. Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’ For student loan forgiveness the government is in the role of the landowner in this parable.
  - nate_meurer 5y ago
    Pay close attention to verse 15. Who's money are we talking about here?
    - syki 5y ago
      As I said, the government plays the role of the landowner. Perhaps you have the mistaken belief that the money you pay in taxes is still your money and therefore you don’t believe the government can play the role of the landowner.
      - nate_meurer 5y ago
        > Perhaps you have the mistaken belief that the money you pay in taxes is still your money. More precisely, I'd say that the government's right to take our resources by force and redistribute them is constitutionally subject and subordinate to their obligation to represent our will as voters. Maybe that makes me a radical? I also wonder why, per your analogy, you think student debtors have some kind of employer-employee relationship with the state?
        imtringued 5y ago
Tanjreeve 5y ago
>But that’s because such measures exclude the very asset the person borrowed to buy—an education that increases lifetime earnings. That’s like assessing a homeowner’s wealth by counting their mortgage balance but not the value of their home. The value of a higher education that it's sold to young people with is the income it allegedly brings in. If that's the case someone uses the product and their income goes up then we already have a means to tax that income it's called income tax. If the product fails to deliver that income but the money is still taken (and as others mention in a non dischargeable way) then I don't see how that isn't fradulent.
- twoodfin 5y ago
  If you think it’s fraudulent for the federal government to give a 22yo a $120,000 loan for a Master of Fine Arts program in theater, then you have to argue that such loans should stop. Only the rich or the beneficiaries of private charity will be able to access MFA programs—or perhaps the taxpayer should make degree programs like that “free”? I think that’s a defensible argument, but it’s regressive in a different way from the status quo.
  - padastra 5y ago
    It’s arguably more harmful to give a poor person $120K in debt to study something that almost certainly returns little, especially as those same people (statistically) may not know that some college degrees are worth significantly less than others. This isn’t fully fleshed out, but the government could set a cap in loans based on anticipated the future earnings. Johnny gets into Med School and wants a $400K loan? Great! Iowa Central College wants to charge $200K for a dance major? Good luck finding students to enroll! This also has the benefit of placing downward pressure on college tuition.
  - Tanjreeve 5y ago
    If you're saying maybe something should be done with the cost of education and incentivising making it a valuable product rather than a way for middlemen to skim money off both students and educators who also haven't benefited from skyrocketing costs then I'd agree 100%. If the programmes are poor then the resulting failures and bankruptcies should be thinning out poor products same as anywhere else. If some rich people benefit with valuable education (or the ever loved MFAs in this debate), so what? That's what income tax is for. The rich having skin in the game too is a good thing.

30 points by brimnes 5y ago

I think the best context to this is this earlier discussion of similar analysis: https://www.currentaffairs.org/2019/06/is-student-debt-cancellation-regressive-no https://www.currentaffairs.org/2019/06/is-student-debt-cance...

twoodfin 5y ago
Two points on that discussion: - AFAICT, the argument that a massive loan forgiveness would not be regressive rests entirely on excluding from the analysis low-income members of the 25-40yo cohort with no student debt. Sure, that fraction may be smaller than in the past, but it’s hard to see how discounting a bunch of poor folks who would see $0 benefit from this expenditure is intellectually honest. - It’s amusing to see a left-wing analysis complain about policy benefits being described in absolute dollar amounts when it’s a doctor making $250k having $50k of his medical school loans forgiven. As I recall, every tax cut debate of the last 20 years has featured charts in absolute amounts showing the tens of thousands of dollars the average 1%’er would save, not the relatively small fraction of income that represented.
- dv_dt 5y ago
  The situation is an entire generation of kids from one point forward were systematically misled about the sure thing security of the benefits of taking a student loan investment vehicle in order to secure their education. When the financial sector was misled about the same regarding "secure" mortgage backed securities in 2008 they were completely bailed out - despite being the sophisticated investors that should have known better. To allow the same for entire generations of students affects our society - causing declining birth rates, poorer health outcomes, poorer life quality. And why? To enforce fiscal discipline that we have not enforced even on sophisticated actors that systemically made a poor choice?
  - twoodfin 5y ago
    None of that speaks to whether the proposed $50k forgiveness is a regressive policy relative to other potential uses of several hundred billion dollars.
    - zarzavat 5y ago
      You can say that about anything. Fixing streets is regressive, it only benefits people with cars. Therefore we should not fix streets. It’s laughable to call student loan forgiveness “regressive”. The word “regressive” is supposed to be used for policies that benefit the wealthy people more than average people, not for policies that benefit average people more than low income people.
      - nate_meurer 5y ago
        You have inadvertently undermined your own argument using a perfect example. One of the most effective arguments in favor of gas taxes and road tolls is to mitigate the regressive nature of universal taxation for road building and maintenance. Because yes, "fixing the streets" is indeed a regressive tax burden for people who can't afford a car. > not for policies that benefit average people more than low income people. According to whom? And are you really satisfied to merely debate semantics?
        zarzavat 5y ago
        I don’t accept that view of how taxation works. Taxes are levied to the extent that they are tolerated, and expenditure is made to the extent that it is demanded. Both are subject to independent political processes. Imagine for the sake of argument that there was a bumper year for vehicle / fuel tax and the tax generated multiplies more revenue than expected. Would the money be spent on diamond encrusted highways or would it instead be spent on other areas that are more in need? Cars are taxed because they can be.
      - salawat 5y ago
        What is the "average person" to a "low income person" if not, relatively speaking, wealthier? You really can't have that both ways. Unless your intent is to partition by +/- orders of magnitude of relative wealth. In that case, we're starting to get into equal protection under the law violation territory.
- Tanjreeve 5y ago
  I think this is post hoc wrapping usury and massive information asymetry in 'some progressiver than thou' language. - if it's about taxing some qualitative value of education then it should be a graduate tax applied equally to everyone with tertiary education. I'd be curious how politicans would manage policies on education and taxes on this value when they are paying it too - if it's not about the qualitative value but about the income, then it should be an income tax. - if it can't be discharged through normal procedures of bankruptcy and terms are rewritten by politicians then it's not 'just a loan' either. In the absence of any of these then these are largely generation taxes in terms of how they fall.
  - twoodfin 5y ago
    It’s really difficult to consider federal student loans as “usurious”. The interest rate is fixed well below market rates for similar unsecured loans. There are numerous income-based repayment & forgiveness schemes that for many borrowers will represent a negative effective interest rate. And no one has had to make any payments on these loans at all for almost two years. It’s also not at all obvious to me how making such loans dischargeable in bankruptcy would actually help borrowers, other than creating a really nice dodge for recent graduates of Harvard Law.
    - Tanjreeve 5y ago
      That's not exactly a ringing endorsement of the system If it's relying on pandemic fiscal policy and/or patchworks of different schemes many operating on political whims to negate fundamental dysfunctional behaviour. The argument for bringing student loans back into line with normal debt is less to do with poverty and more to do with not creating a system that incentivises racking up the price as much as possible and letting debt (and bailouts) patch up the difference when it all falls apart and the product doesn't actually fulfill any of its sales pitch and the price goes up far beyond what any reasonable income expectations can sustain. If the system is fixed for graduates of Harvard law then I don't think that's skin off anyone elses teeth. Bankruptcy is not exactly an easy route into legal practice so I think you're being a bit fixated on a v small edge case.

deleted 5y ago

[deleted]

brunellus 5y ago

There’s no need to measure anything. The problem with student loans is qualitative. Banks are allowed to make unsecured loans and the borrowers can’t usefully declare bankruptcy. Colleges have every reason to raise prices and lenders have no skin in the game. It isn’t any more complicated, and no amount of data analysis can possibly refute this.

twoodfin 5y ago
It hasn’t been “banks” for a decade: Student loans today are overwhelmingly supplied directly by the federal Department of Education. That’s why a huge jubilee is even plausible.
- brunellus 5y ago
  My original argument still stands. And the government was perfectly capable of bailing out private companies at the end of Bush Jr’s second term.
syki 5y ago
If data showed that at regional state universities and community colleges the rise in tuition corresponded with the decrease in public funding per student then you wouldn’t believe it? Or that such data would mean nothing to you? Consider the linked article and keep in mind that enrollment in higher Ed has declined since 2008. https://www.cbpp.org/research/state-budget-and-tax/state-higher-education-funding-cuts-have-pushed-costs-to-students https://www.cbpp.org/research/state-budget-and-tax/state-hig...
- brunellus 5y ago
  It’s a good question. I would be interested to know which economic forces drove the price changes. I suspect that prices could still increase even in spite of public funding decreases due to the point in my original post. But to me, all of these side effects can be thought of as fruit from a poisonous tree, and thus unjustified.
anm89 5y ago

tamaharbor 5y ago

I have always paid all of my debts, including student loans. I think it is quite unfair that some will get off scot-free. What lesson does that teach?

syki 5y ago
Mathew 20:13 “But he answered one of them, ‘I am not being unfair to you, friend. Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’ For student loan forgiveness the government is in the role of the landowner in this parable.
- nate_meurer 5y ago
  Pay close attention to verse 15. Who's money are we talking about here?
  - syki 5y ago
    As I said, the government plays the role of the landowner. Perhaps you have the mistaken belief that the money you pay in taxes is still your money and therefore you don’t believe the government can play the role of the landowner.
    - nate_meurer 5y ago
      > Perhaps you have the mistaken belief that the money you pay in taxes is still your money. More precisely, I'd say that the government's right to take our resources by force and redistribute them is constitutionally subject and subordinate to their obligation to represent our will as voters. Maybe that makes me a radical? I also wonder why, per your analogy, you think student debtors have some kind of employer-employee relationship with the state?
      - imtringued 5y ago

Tanjreeve 5y ago

>But that’s because such measures exclude the very asset the person borrowed to buy—an education that increases lifetime earnings. That’s like assessing a homeowner’s wealth by counting their mortgage balance but not the value of their home. The value of a higher education that it's sold to young people with is the income it allegedly brings in. If that's the case someone uses the product and their income goes up then we already have a means to tax that income it's called income tax. If the product fails to deliver that income but the money is still taken (and as others mention in a non dischargeable way) then I don't see how that isn't fradulent.

twoodfin 5y ago
If you think it’s fraudulent for the federal government to give a 22yo a $120,000 loan for a Master of Fine Arts program in theater, then you have to argue that such loans should stop. Only the rich or the beneficiaries of private charity will be able to access MFA programs—or perhaps the taxpayer should make degree programs like that “free”? I think that’s a defensible argument, but it’s regressive in a different way from the status quo.
- padastra 5y ago
  It’s arguably more harmful to give a poor person $120K in debt to study something that almost certainly returns little, especially as those same people (statistically) may not know that some college degrees are worth significantly less than others. This isn’t fully fleshed out, but the government could set a cap in loans based on anticipated the future earnings. Johnny gets into Med School and wants a $400K loan? Great! Iowa Central College wants to charge $200K for a dance major? Good luck finding students to enroll! This also has the benefit of placing downward pressure on college tuition.
- Tanjreeve 5y ago
  If you're saying maybe something should be done with the cost of education and incentivising making it a valuable product rather than a way for middlemen to skim money off both students and educators who also haven't benefited from skyrocketing costs then I'd agree 100%. If the programmes are poor then the resulting failures and bankruptcies should be thinning out poor products same as anywhere else. If some rich people benefit with valuable education (or the ever loved MFAs in this debate), so what? That's what income tax is for. The rich having skin in the game too is a good thing.