[AKN #109] Please Forgive Me For Thinking The Student Loan Bailout Is A Dumpster Fire
LAUGH: Reporter Tries To Tell Us About A Burning Pile Of Heroine, LOVE: Alligators Don’t Float
Is there anything worse than washing the dishes?
Arguing with your significant other about the way the bowls should be stacked on the top rack of the dishwasher.
Every night, my fiancé and I play dish washing Tetris. One person loads the dish washer and the other person introduces new Tetris pieces and criticizes wherever they are placed. Weird, cause I just read a study about how playing Tetris relieves stress…
Seriously though, for fuck sake, dishwasher companies. Can you throw us a bone here and give us a vision board for how I should load these bad boys in? I need some inspiration.
Otherwise we are just slaves to tradition. You see, we all inherit three things from our parents: our hairlines, our politics, and the way we load our dishwasher. And the last one is by far the hardest to change over the course of your life.
Some people grew up rinsing the dishes before they put them in the dishwasher because they don’t trust the dishwasher to actually clean the dish.
Other people put their half eaten lasagna in there like they are making some pasta based offering to the dishwashing Gods.
So many of these little idiosyncrasies around washing the dishes.
But my personal favorite is when there's that one dish that’s a little too dirty. So I put a bit of soap on it, splash some hot water on it, and say out loud "this has to soak over night!"
Work smarter, not harder, homies.
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LIVE: Please Forgive Me For Thinking The Student Loan Bailout Is A Dumpster Fire
A hand crafted, artisanal post by me
Every now and again, I decide to go against all reason and take on the topic de jour.
Today is one of those days.
Last week, President Biden announced $10,000 in student loan forgiveness for people who have student loan debt and make less than $125,000.
As far as I can tell, 99% of “analysis” on this topic is simply people saying generic feel good statements (“student debt is bad!”, “no free lunch!”) or leaning into anecdotes.
On the right, you will hear about the plumber who is going to be paying for their neighbor’s graduate degree in gender studies. Of course we won’t mention that it’s pretty fucking obvious that the entire $1.75 trillion in student loan debt across more than 43 million borrowers did not all go to gender studies graduates.
On the left, you will hear about the disadvantaged youth who with the help of this $10,000 will be freed from the shackles of financially induced indentured servitude and will now finally reach the apex of American civilization — home ownership. Of course we won’t mention what part of the country where a $10,000 change in debt would suddenly boil up to owning a home because…you know…that part of the country is effectively made up.
Both sides are equal parts pure emotion and mind numbingly irritating.
I will not be doing that. I will purely be looking at the data.
And if you follow the data, you will find that this is a TERRIBLE policy for three major reasons:
This money is not free.
This money is not going to the people in the United States who most need it.
This injection does not solve the root cause of the student loan crisis.
Let’s get started.
1. This Money Is Not Free
By far the worst take is “student loan forgiveness doesn't incur a cost to taxpayers."
It is the worst take because it is so obviously wrong.
This is not how money works. We are not able to just forget about debt without consequence. We intuitively know this because…well…we have debt.
If there were no consequences to forgiving debt, why wouldn’t you forgive all of the student loan debt?
Penn Wharton Budget Model says it will “cost the government $330 billion to cancel $10K in per borrower making <$125K. The average cost per taxpayer comes out to nearly $2,100.”
You can get a good feel for how this affects your particular case if you break it down by income level.
So let’s all start on an intellectually honest footing.
This loan forgiveness costs money. It will cost money in the form of cutting government spending or increased taxes.1
This means that the debt is not so much “canceled” as it is “redistributed.”
2. This Money Is Not Going To The People In The United States Who Most Need It
This one is going to be contentious, but I promise if you stay with me here, you will see I am right.
I am not against cash infusions/debt forgiveness to those in need. But I am against cash infusions/debt forgiveness to people who are not in need. And that is what this is.
As can be seen from the analysis by Nick Maggiulli found here (I am going to paraphrase/quote from this analysis for rest of post), the reality of the situation is this policy is somewhat regressive given that it would benefit households that already have higher incomes than the vast majority of U.S. households.
Start with the obvious: 57% of Americans have no debt and no college degree. It will come as no surprise to you that these people are financially not doing well. But of course, these people do not qualify for any student loan forgiveness.
When you look at this group compared to the college debt group (highlighted in BLUE), you will see we are quite obviously not helping the people “most in need.”
But you might say “no, no, no, you have to look at this from a net worth standpoint. These people have massive debts!”
Ok. Well if we do that, we will…uh…again see that not having a college degree is a massive hit to people’s economic livelihoods. So again, people without college degrees are the most in need here.
Like it is pretty clear that those with student loans and a college degree are, for the most part, doing better than those with no debt and no college degree.
In TODAY dollars, the no debt (some/no college) group struggles the most. But just you wait, because it actually gets worse when you consider this from a FUTURE dollars perspective.
A common argument tact taken when trying to argue that college student loans should be forgiven completely is the idea that in the age of the Internet college is “just a useless piece of paper.”
Unfortunately, that is simply not correct. College still is one of the most powerful income multipliers we have. We know this because most individuals with debt tend to be getting their money’s worth.
Research has shown that those with higher debt loads earn more than those with lower debt loads. This suggests that most individuals see a return on their student loans in the form of a higher paying career.
So we are charging all US tax payers without debt to infuse cash into a segment of the population who — in the long run — largely does not need it.
Of course there are exceptions to this, but this is mostly what happens.
3. This Injection Does Not Solve The Root Cause Of The Student Loan Crisis
So we have gotten through my two short term gripes about this policy:
It costs a lot of money
It sends that money to people who largely do not need it
Now let me cover the next order issue: the long term.
This policy does absolutely nothing to solve the root cause of the student loan debt crisis.
Analysis has been done which shows exactly this.
Name your bailout.
A $10k bailout? A $50k bailout? What about a full bailout of all student loan debt?
You know what all of those have in common?
Done in isolation they will solve nothing.
Canceling this debt without a plan about how to:
Reduce rising tuition costs (which are predicted to increase further with the new debt relief)
Reduce predatory federal student loan interest rates (7%!)
Change the country narrative on how we need to go to college at all costs despite the market realities that the increased earning potential from earning a degree from things like say for profit colleges is negligible at best
That is simply just saying “this is future United States problem to deal with.”
Overall, I don’t understand how anyone can look at this policy and call it a “success.”
It quite literally costs every tax payer who doesn’t have student loan debt thousands of dollars whilst transferring wealth to a large number of people who don’t actually need the money all while not actually solving the problem it claims to address.
Like we realize that we are setting ourselves up to ride this fucking broken merry go round for the rest of time, right?
So Where Do You Recommend We Go From Here?
Ok. So that was a lot of negativity.
But in the name of being “solutions oriented”, allow me to give it a go with some recommendations for doing better.
Largely speaking, my thoughts around solutions align with what Mike Solana says here.
But if I were trying to solve the student loan crisis, I would start with the following two steps:
Step 1: Let people declare bankruptcy on their student loans.
We currently bar Americans from discharging their student loans in bankruptcy.
Read that sentence back to yourself. How fucking insane is that?
The United States Government will garnish your social security wages if you still owe student loan debts when you retire. That is a real life thing.
Change that now and allow people to wipe their debt clean.
Step 2: Remove predatory interest rates on existing and new loans.
I’m all for making college more accessible. So why don’t we start by not taking advantage of the people most at need?
The people who need to borrow the most money to pay for school are mathematically fucked with a 7% interest rate on their loans.
Like that is an insurmountable mathematical equation when the lent amount is $100,000.
Bring these interest rates more in line with reasonable lending rates so people actually have a chance to pay these off.
That is where I would start. Sure, there are more steps than that to truly solve this, but I would love to see those two things to start.
Ok. I’m done. I will now retreat and prepare for the absolutely insane shelling incoming from people who think I am wrong.
I hope they at least bring data…
LAUGH: Reporter Tries To Tell Us About A Burning Pile Of Heroine
A curated joke I found wading through the cesspool of the Internet
This is oddly endearing. He just can’t finish the sentence.
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Something I have been loving
This makes me oddly uncomfortable.
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