The Radical Idea to Forgive all Student Loans

This interesting article in New York Magazine about the proposed economic benefits of forgiving all of the outstanding $1.4 trillion in student loans has been making the rounds recently:

According to the Levy Institute paper, authored by economists Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, canceling all student debt would increase GDP by between $86 billion and $108 billion per year, over the next decade. This would add between 1.2 and 1.5 million jobs to the economy, and reduce the unemployment rate by between 0.22 and 0.36 percent.

So, the macroeconomic upside of canceling all student debt would be substantial. The primary (supposed) downsides of such a policy would be a higher deficit, the potentially regressive distributional consequences of debt forgiveness, and (relatedly) the unfairness of rewarding certain well-off borrowers who don’t “deserve” it. Of course, all of these critiques would apply more powerfully to the recently passed tax cut bill. Few people would argue that increasing Harvey Weinstein’s after-tax income was a laudable public policy goal. But no one thinks that we should judge the merits of a tax cut on the basis of whether it rewards any unsavory individuals.

Forgiving $1.4 trillion in debt sounds nuts, but as a convenient near-perfect foil, we instead have a $1.5 trillion tax cut that probably won’t do a whole lot to help anyone who needs it.

The government theoretically profits from the Direct loan program, but the currently rising and soon to be endemic rates of default now predict that the government will start losing a lot of money in the near future.

What most people don’t realize when it comes to the alarmingly rapid rise of student loan default is that the most common culprits are not big borrowers attending expensive private schools (though that happens too, and certainly the need to repay large amounts of debt can be crippling and limits consumption). It’s actually people who borrow less than $10,000. It’s the people, many of whom who never completed a degree program or who received technical training at an unsavory for-profit “institution” like Trump University, who are unable to find the good steady work needed to pay off even a relatively small loan.

As with tax breaks, the biggest winners of the definitely-not-going-to-happen universal loan cancellation would, at least on paper, be high-debt high-income professionals like business school graduates and physicians. But unlike a tax break, not needing to use IDR would result in the same return of 10%+ from every borrower’s income, year after year—a much bigger and likely much more meaningful change, and it would also mean that those who default would finally be able to take steps to rebuild their credit.

Brevity: A Flash Fiction Handbook

I finally had a chance to sit down and enjoy Brevity: A Flashfiction Handbook by David Galef.

This was particularly fun because:

I’ve published six stories by Mr. Galef in Nanoism, my unusual journal that exclusively features Twitter fiction, the longest running of its kind. Keeping it in the family, I’ve actually published even more (10!) by his son, Daniel Galef.

Nanoism is featured in the chapter discussing microfiction. Galef defines nanofiction in the book basically exactly as I did when I started publishing in 2009: Twitter fiction, stories of 140 characters or less (i.e. teeny teeny teeny tiny stories). As the book includes examples of flash fiction’s many forms and styles, two pieces from Nanoism’s library of almost 800 stories also made it into the book (on page 123).

Aspiring writers of very short stories would do well to check out Brevity in addition to The Rose Metal Press Field Guide to Writing Flash Fiction which came out back in 2009. Good stuff.

Trump hasn’t killed PSLF yet

There are a lot of headlines talking about what Trump is doing to PSLF.

But, to be clear, Trump isn’t doing anything to PSLF.

What Trump has done is release a budget proposal, as the sitting president does every year. This proposal is meant to signal policy goals for the administration, but nothing in it is binding. Presidents don’t make budgets; Congress does. President Trump made similar student loan requests for 2018 as he has for 2019, and they were roundly ignored last year. President Obama recommended capping PSLF during his last years in office, and that was ignored as well.

Don’t get me wrong, I don’t think PSLF is going to last forever. It’s going to be much more expensive than the government realized, and pulling out the rug from “rich” doctors may one day prove to be relatively good optics for budget savings.

But, there’s a big difference between PSLF being shuttered in the future (or even next year), and PSLF going away for those are already counting on it.

PSLF is still available, and there’s no reason to ignore it.

Make no mistake, Trump absolutely does want to kill PSLF. However, this is the actual language of the Trump FY2019 budget proposal, and it’s pretty clear that it does not affect old borrowers (emphasis mine):

Reforms Student Loan Programs. In recent years, income-driven repayment (IDR) plans, which offer student borrowers the option of making affordable monthly payments based on factors such as income and family size, have grown in popularity. However, the numerous IDR plans currently offered to borrowers overly complicate choosing and enrolling in the right plan. The Budget proposes to streamline student loan repayment by consolidating multiple IDR plans into a single plan. The single IDR plan would cap a borrower’s monthly payment at 12.5 percent of discretionary income. For undergraduate borrowers, any balance remaining after 15 years of repayment would be forgiven. For borrowers with any graduate debt, any balance remaining after 30 years of repayment would be forgiven.

To support this streamlined pathway to debt relief for undergraduate borrowers, and to generate savings that help put the Nation on a more sustainable fiscal path, the Budget eliminates the Public Service Loan Forgiveness program, establishes reforms to guarantee that all borrowers in IDR pay an equitable share of their income, and eliminates subsidized loans. To further improve the implementation and effectiveness of IDR, the Budget proposes auto-enrolling severely delinquent borrowers and instituting a process for borrowers to consent to share income data for multiple years. To facilitate these program improvements and to reduce improper payments, the Budget proposes to streamline the Department of Education’s ability to verify applicants’ income data held by the Internal Revenue Service. These student loan reforms would reduce inefficiencies and waste in the student loan program, and focus assistance on needy undergraduate student borrowers instead of high-income, high-balance graduate borrowers. All student loan proposals would apply to loans originating on or after July 1, 2019, except those provided to borrowers to finish their current course of study.

“…except those provided to borrowers to finish their current course of study” further supports that students in the middle of the course of study will get grandfathered into PSLF.

So, new borrowers starting in 2019 at the earliest would be part of the new program.

And by new, I mean the US government’s definition of “new,” which really means having no federal loans prior to this date.

So:

  • Current students need not panic.
  • Former students currently in repayment need not panic.
  • Future borrowers who plan to only attend college need not panic (because the new proposal is actually pretty favorable to undergraduate loans).
  • Future borrowers who plan to attend expensive graduate schools like medical school should cross their fingers.

And, none of this matters if Congress does this year what they did last year and ignores the problem. Student debt is a hot-button bipartisan issue. Whatever reform, if any, does get passed is unlikely to look like a carbon copy of the Trump plan.

 

Concussion Protocol

Shaun King reacting to Josh Begley’s short reverse-highlight reel “Concussion Protocol” in The Intercept:

It’s not a headache. It’s not “getting your bell rung.” You don’t have a bell. It’s a traumatic brain injury.

Amazon Enters

Amazon is now so dominant as a corporate force that even the announcement of a plan to someday enter a new industry is enough to crush stocks.

This happened to Blue Apron last summer after Amazon bought Whole Foods and filed a trademark for a possible meal-kit service a week after Blue Apron’s IPO, whose new stock proceeded to immediately tank.

Now it’s happening to healthcare, as Amazon, Berkshire, JPMorgan partner to cut U.S. healthcare costs:

Shares of UnitedHealth Group Inc (UNH.N), Cigna Corp and health insurer Anthem Inc (ANTM.N) were 4 percent to 7.2 percent lower at the close. Drugstore operators CVS and Walgreen Boots Alliance (WBA.O), as well as Express Scripts, closed between 3 percent and 5.2 percent lower. Drug distributors Cardinal Health (CAH.N), AmerisourceBergen Corp (ABC.N) and McKesson Corp (MCK.N) were off 1 percent to 3 percent. Amazon closed up 1.4 percent.

To be sure, the $69 billion loss in healthcare stock value should rapidly self-correct (unlike for Blue Apron, which does not enjoy a stranglehold on an entire segment of the economy).

But in the announcement, the new venture has zero stated plans outside of using “technology” to reduce costs for their own employees, but they do plan to “share the strategies and technology they ultimately develop to reduce costs for the economy and the government.” It doesn’t matter what Amazon does, just that they plan on doing something.

The fact that Bezos is joined by the biggest bank (JPMorgan) and the biggest non-healthcare insurer (Berkshire) just nicely rounds out the trifecta.

Who knows, maybe they could deign to start by developing a good EMR that also uses standards to make healthcare data completely portable in order to empower patients and reduce confusion, overuse, and duplication. If it’s just Amazon Prime Rx with cheaper mail order prescriptions, I’ll be a bit underwhelmed.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and CEO Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

Buffet’s still got it.