Friday, February 9, 2018

Ryan Cooper — The case for erasing every last penny of student debt

Student loan debt is a crushing problem in America. Over 44 million people have such loans, with an average balance of about $30,000 — making for a total debt pile of $1.4 trillion. Unsurprisingly, people often struggle to repay these debts with their entry-level wages after graduating. Student debt is now the most common form of troubled debt, with about 11 percent of them 90 days or more delinquent. Worse still, thanks to Republicans and neoliberal Democrats alike, they are almost impossible to discharge in bankruptcy.
We should try the most obvious solution: Congress should cancel all the debt and have the government pay back the lenders.
Perhaps that sounds radical and unworkable. But a new Levy Institute research paper by Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum demonstrates that it would be easily affordable and have powerfully positive side effects....
The Week
The case for erasing every last penny of student debt
Ryan Cooper

9 comments:

Ralph Musgrave said...

Very silly paper. It's blindingly obvious that cancelling loads of debt and dishing out money to universities to compensate will be stimulatory. Dishing out money to winos and drug addicts would doubtless also be stimulatory. That an argument for doing that?

And if the UK government would like to send me £X,000,000,000 I promise the effect would be stimulatory.

Noah Way said...

Non sequitur.

Try again.

Or better yet, don't.

Six said...

The money wouldn’t go to the universities. They already got paid. If the debts are held by banks, the loans would disappear and be replaced by reserve balances (causing Franko to panic, no doubt!).

Matt Franko said...

I think the loans are mostly held by government... probably just serviced by banks....

Would sort of be like a tax cut for current people with a loan balance...

Tom Hickey said...

In June 2010, the amount of student loan debt held by Americans exceeded the amount of credit card debt held by Americans.[70] At that time, student loan debt totaled at least $830 billion, of which approximately 80% was federal student loan debt and 20% was private student loan debt. By the fourth quarter of 2015, total outstanding student loans owned and securitized had risen to, and surpassed, $1.3 trillion.[71] This rising student debt is contributing to the expanding wealth gap

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

Matt Franko said...

“80% was federal student loan debt ”

Progressive Sen. Liz Warren has a proposal to limit the interest the govt charges on these loans to a maximum of Prime +2% ... awfully nice of her....

Neil Wilson said...

"Would sort of be like a tax cut for current people with a loan balance..."

That's actually all student loans are - a very elaborate way of maintaining a list of people who can be taxes more than everybody else.

However if the bargain over degrees holds - that you give up three years of your earning life to gain skills that will lead to a higher paid job (and better productivity for society from your skills), then you will pay more tax distributionally anyway because you are earning more.

Student loans is a craft way of saying that degrees are essentially worthless. Society no longer believes in the bargain and you're probably better off being a plumber.

Matt Franko said...

Maybe a good compromise would be for the govt to at least not charge interest...

Ryan Harris said...

Because college grads need help. Their unemployment rates are highest in society. Their earning power the lowest. While we are at it, why don't we give them a tax break to buy a sports car and maybe a solar panel for their mcmansion? Intersection of privileged professor and political power always leads to one conclusion: Moar 💰 for education!