Wipe Out Student Debt and Everyone Wins, Says Bernie's Economist — Katia Dmitrieva and Alexandre Tanzi

 

Positive reporting. MMT is now being taken seriously.

Bloomberg
Wipe Out Student Debt and Everyone Wins, Says Bernie's Economist 
Katia Dmitrieva and Alexandre Tanzi

Jeff Spross — Why canceling student debt could be good for everyone

It's difficult to project precisely what the overall economic impact of this would be. Student debt is distributed all up and down the income ladder, and people at different income levels will spend or save the freed up money in varying proportions — it's the spending that will juice job growth and economic activity. But a Levy Institute paper from early 2018 — written by economists Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum — took a crack at figuring it out.

The Week
Why canceling student debt could be good for everyone

Jeff Spross

Katrina vanden Heuvel — Americans are drowning in student-loan debt. The U.S. should forgive all of it.

I'll break a self-imposed rule and link to the WaPo for this.

The debt burdens not only the debtors but also the entire economy by dampening consumer demand. The federal government guarantees more than 90 percent of all outstanding student debt. A recent paper by Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin and Marshall Steinbaum of the Levy Economics Institute found that if the government canceled the debt it owns and bought out the remaining private creditors, it would increase gross domestic product by between $86 billion and $108 billion per year over the next decade, adding between 1.2 million and 1.5 million jobs.

More importantly, if combined with making all public universities tuition-free, this country would ensure that no young person is condemned to debt for pursuing the higher education or technical training that virtually everyone agrees is vital to this nation’s future....

The Washington Post
Americans are drowning in student-loan debt. The U.S. should forgive all of it.
Katrina vanden Heuvel | editor and publisher of The Nation

Ben Schiller — Want To Stimulate The Economy? Cut Student Debt–Not Taxes

The recently passed Republican tax cut package will cost about $1.4 trillion over a decade, according to independent figures. It’s a very expensive policy that currently is not offset by an increase in government revenue, or by spending cuts.

Another measure would cost about the same amount and it too would be hard to justify as a deficit-busting policy. But it might have greater economic benefits, say economists. That policy would be canceling all student debt.

The contention comes from a paper from the Levy Economics Institute at Bard College, which models the macroeconomic impact of relieving 44 million Americans of what they owe for college. About 90% of the $1.4 trillion is held by the federal government. The rest is in the form of private loans.

This policy would be more macro-economically stimulative because of who the beneficiary is,” says Marshall Steinbaum, research director at the left-leaning Roosevelt Institute, and one of the authors of the report. “The tax cuts will go to higher income households that have a lower propensity to spend the money. We show that reducing the burden of student debt on households enables them to spend more.”...

Fast Company
Want To Stimulate The Economy? Cut Student Debt–Not Taxes
Ben Schiller

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

Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum — The Macroeconomic Effects of Student Debt Cancellation

Download PDF at link below.

The Levy Institute
The Macroeconomic Effects of Student Debt Cancellation
Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum
February 2018

Yves comments.

Naked Capitalism
New Study Finds Cancelling Student Debt Provides Broad Economic Benefits at Low Cost

Yves Smith

Michael Hudson — Are Students a Class?

Debtor class.

Hudson shows how debt is a key element of the strategy of finance capitalism.

...the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt....

Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.)...

...banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.…

This is simply a replay of what banks have negotiated for real estate mortgage lending....

In view of the fact that a college education is a precondition for joining the working class (except for billionaire dropouts), the middle class is a debtor class – so deep in debt that once they manage to get a job, they have no leeway to go on strike, much less to protest against bad working conditions. This is what Alan Greenspan described as the “traumatized worker effect” of debt.…

In today’s world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties....

For half a century Americans imagined themselves getting richer and richer by going into debt to buy their own homes and educate their children. Their riches have turned out to be riches for the banks, bondholders and other creditors, not for the debtors. What used to be applauded as “the middle class” turns out to be simply an indebted working class....

Michael Hudson
Are Students a Class?

Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Michael Hudson — Another Housing Bubble?

Another good one from Michael Hudson. Covers student debt too.

Michael Hudson
Another Housing Bubble?
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Raúl Carrillo — How the U.S. Government Could End the Student Debt Crisis Today

Instead of loaning students money, the federal government could just pay for their tuition, without causing any significant economic problems.

Yes! Magazine
How the U.S. Government Could End the Student Debt Crisis Today
Raúl Carrillo

h/t JLC in the comments

John T. Harvey — Student Loan Debt Crisis?

But, despite it’s search-engine popularity and the associated journalistic sensationalism, it’s not at all evident that we are witnessing the development of another speculative bubble. In fact, once you break down the facts, it turns out that the parallels are relatively few. That said, however, student debt loads are a problem, and a serious one. Not only do they create a significant drag on short-term economic activity, but they will stunt our long-term growth as well. And the situation is deteriorating. The disease is real, it’s just more subtle and insidious than a financial market boom and bust.

Forbes — Pragmatic Economics
Student Loan Debt Crisis?
John T. Harvey | Professor of Economics at Texas Christian University

Insane policy: Fed'l gov't makes a $41 billion profit on student loans

Question: What kind of government seeks to make a profit on money that it can issue freely and without limit and when doing so serves no public purpose?

Answer: The U.S. government, on the belief that it has no dollars and must, therefore, engage in profit seeking enterprise.

While some folks may be cheering this (maybe even some of our "leadership"), the fact of the matter is, it's categorically insane.

First off, those are profits that could have been earned by the private sector and, secondly, what good does it do to load your citizenry up on debt when the economy is not creating the jobs needed to pay those loans back?

There is no greater asset to any nation than a well educated citizenry, but apparently the powers that be, believe otherwise. They believe profits--in U.S. dollars--are more important.

DID ANYONE TELL THESE GENIUSES THAT THE GOVERNMENT CAN ISSUE DOLLARS WITHOUT LIMIT AND VIRTUALLY AT ZERO COST??

Total, fucking idiocy.

Tyler Kinkade — Student Debt Is Making All Your Life Choices Worse

According to a new report from the Boston-based nonprofit American Student Assistance, a quarter of college students said their student loans made it difficult to buy daily necessities, and nearly two-thirds said their debt prevented them from making large purchases, like buying a car.

In addition to this drag on lifestyle and consumer spending, student debt also played a significant role in larger financial and personal commitments. Three-fourths of respondents said they put off saving for retirement or buying a home because of their debt. Almost one-third delayed marriage and 43 percent waited to start a family.

These choices all have a ripple effect on the greater economy, as the Consumer Financial Protection Bureau has warned and as the ASA report concluded....

"If student loan borrowers continue to sit on the sidelines and delay financial commitments, the U.S. economy will plod cautiously along -- rather than thrive with the help and economic investment of a new generation of well-educated consumers, eager to participate in driving the economy but hampered by their college debt," the report says. "It is in everyone's best interest to address this problem and make a concerted effort to lessen the burden that student loans are having on generations of American consumers." 

The Huffington Post
Student Debt Is Making All Your Life Choices Worse
Tyler Kinkade

Zero Hedge — The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.

Zero Hedge
The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default
Submitted by Tyler Durden

These loans are federally guaranteed so wait for another bailout. 

These loans can not be discharged in bankruptcy, so many students are going to be living with the consequences for a long time, likely including wage garnishment if they ever do get a job.

It's a debacle that will impoverish a significant portion of the generation.

Robert Oak — Student Loan Debt Time Bomb

Student loan debt is now the next great bubble, threatening the U.S. economy as the mortgage crisis did. The NACBA [National Association of Consumer Bankruptcy Attorneys] released a study and calls student loan debt the next financial crisis, on the level of the mortgage crisis.

Read it The Economic Populist
Student Loan Debt Time Bomb
Robert Oak

Another rent bomb ticking. Who needs terrorists when we are hell-bent on blowing ourselves up.

Will The Student Debt Burden Depress The US Housing Market For The Foreseeable Future? (Yes)

So, the US has a uniquely substantial drag around its younger population that will make large portions of its younger population unable to buy homes for a long time to come. Forget any serious "recovery" of housing prices anywhere in the US anytime soon.

Read it at Econospeak
Will The Student Debt Burden Depress The US Housing Market For The Foreseeable Future?

by Barkley Rosser
(h/t Mark Thoma)

Barkley Rosser agrees with what Dr. Housing Bubble has been saying for some time.

Yves Smith — The Burgeoning Student Debt Problem

Even though other consumer debt-bombs have done more damage, student debt is producing significant social and economic distortions. One is so useful to the authority structure that it seems certain that they will keep this type of bondage in place. Heavy debt loads pressure young people into making conservative choices. If you carry a lot in the way of student loans, you have to worry about employability. That doesn’t simply push graduates into bigger ticket (hence more conventional) career choices; more important, it makes them far less likely to step out of line. In particular, an arrest record, which is often a by product of protesting, is an automatic out with a lot of employers.

But the level of student debt, now estimated at over $1 trillion outstanding, is having an impact on spending. First time home buying is running below the level expected given new household formation, and a big culprit is student debt loads, since many young people are too leveraged to take on a decent-sized mortgage on top of their existing obligations. In addition, the 25 to 39 year old cohort is the top target of advertisers, but the more debt service they have, the less they can buy in the way of goodies.

Read the rest at Naked Capitalism
The Burgeoning Student Debt Problem

by Yves Smith

The next debt bomb? Even if not, it is structurally altering the economy in a way that postpones demand for major economic drivers like housing. The housing recovery is already weak; in fact, the bottom is not yet in. Dr. Housing Bubble, for example, has been warning about student debt as a drag on the housing recovery and one that is likely to persist until some solution is implemented.