Republicans blocked Sen.
Elizabeth Warren’s (D-Mass.) student loan bailout bill yesterday,
and Democrats have already jumped on it as a campaign issue. That
was probably the left’s plan all along, given that the bill would
have raised taxes on the rich and never had any chance of passing
the House of Representatives.
“We have the broad support from the American people and that is
going to play very well for us as we move towards November—and
that’s the bottom line here,” said Sen. Chuck Schumer (D–N.Y.).
Others echoed his comments, according
to Politico:
“With this vote, we show the American people who we work for in
the United States Senate: billionaires or students,” Warren said on
the Senate floor on Wednesday.And “instead of fighting for working families and college
affordability, some members of Congress are fighting to keep their
millionaire constituents from paying their fair share of taxes,”
National Education Association President Dennis Van Roekel said in
response to the Senate’s action.
Even President Obama seized on the
Republicans-don’t-care-about-poor-kids rhetoric:
“We want a Republican Party that can function and with which we
can negotiate and compromise and help move the country forward,” he
said. “But unfortunately, that’s not what we’re seeing in
Washington right now from the Republicans … How could we not want
to invest in these kids? … Why wouldn’t we want to make sure that
college was affordable and that they weren’t burdened with $30,000
or $50,000 or $70,000 worth of debt? Why wouldn’t we want to create
an economic environment in which in their first job, if they’re
working full-time, they’re not living in poverty, and that they can
save a little bit and they’re getting a fair wage?”
Never mind that Republicans did work with Obama last
summer on student loans, approving a bipartisan deal that indexed
loan interest rates to Treasury bonds rather than the whims of
Congress. The major thorn in the president’s side back then was
actually Warren, who didn’t want to accept anything short of
substantial debt forgiveness for student borrowers.
The trillion dollars of loan debt collectively held by students
and graduates is an undeniably tricky problem. But
wiping away that debt is a bad fix. Such a solution punishes
taxpayers for the bad judgements of borrowers, encourages more
reckless borrowing, and sends universities the message that they
can raise tuition even higher.
Still, expect to see lots of Democrats campaigning on the notion
that Warren’s debt deal would solve all of millennials’ financial
problems if only those mean Republicans would back off.
Reality is of course a little more complicated. In a recent
column, Bloomberg View‘s
Megan McArdle explained why student loan debt is actually a
problem of the privileged:
It’s good to remember, as we discuss these plans, that people
with college degrees are the best-off people in the U.S. They are a
cognitive elite with substantially more earning power than almost
anyone else, unless that someone else can throw a mean fastball,
dunk or get their body fat down to less than 4 percent by the time
their feature film is ready to shoot. It’s hard to see why we would
take money from other people and give it to this group.
People with lots of student loan debt and low earnings are, of
course, a particularly visible group to journalists, who cluster in
expensive cities and know a lot of expensively educated people.
It’s not surprising that a huge number of articles get written
about this problem. But it’s still disproportionately a problem of
the affluent. And the government already spends quite a lot of
money on benefits for the affluent.If we wanted a program to help the majority of the population,
we’d offer loan guarantees to help poor people get access to
reliable cars so that they could have a better shot at getting —
and keeping — a well-paying job. I know you’re thinking that
sounds crazy, but if you spend any time listening to the problems
of working-class people — many of whom lacked the opportunity, the
interest or the academic ability to get through college — you’ll
get an earful about the problems of driving a beater that
constantly breaks down. A small amount of capital could make a much
bigger difference in their lives than extra student loan relief for
middle-class college kids would.I say “extra” because we already have a very generous
income-based repayment system for student loans. The IBR
program allows you to hold your loan payments to no more
than 15 percent of your discretionary income and stretch out the
payment term to 25 years, after which any remaining debt is
forgiven. To be sure, you have to have a partial financial hardship
to qualify — but the “financial hardship” is that . . . your
payments on the standard plan would be more than 15 percent of your
discretionary income. As someone whose initial loan payments were
closer to 50 percent of her discretionary income, I can testify
that that’s a pretty sweet deal.
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