Glawker posted a surprisingly bad piece by Steven Chung this week. "How bad?" you are most certainly asking. Let's have a look, shall we.
In this column, Mr. Chung discusses the progressive left's incessant calls to forgive student loan debt. If you were expecting in-depth analysis with keen insights, you will be sorely disappointed. First, Mr. Chung addresses whether President-elect Biden even has the power to broadly forgive student loan debt.
Can the president unilaterally forgive federal student loans? According to an opinion from the Legal Services Center of Harvard Law School, he can. In 2019, President Trump granted student loan forgiveness for disabled veterans. An executive order might be the only option as it is uncertain whether Democrats will control the Senate in January. Even if they did, some Democratic senators may be skeptical to the idea of wholesale loan forgiveness which will be paid by taxpayers, and it only takes one no vote to prevent passage of any forgiveness bill.
Well, if a group of lawyers working for the "Project of Predatory Student Lending" says the President can forgive student loans, it must be true. And no, there's no chance these lawyers are biased given the nature of their practice. I also love that he recognizes that many senators may balk at forgiving student debts and forcing the burden for peoples' poor decision making on taxpayers, but hey, that's why the President should do it by executive order. You see, undermining democracy is just fine as long as it's a Democratic President doing it.
And then we have this incomprehensible paragraph.
Unfortunately, the coronavirus has worsened the student loan problem for many since they have lost their jobs or their usual business income. This means that most people will try to defer or skip student loan payments since food and shelter is more important.
This paragraph is terrible, but I can't tell whether it's because Mr. Chung is an idiot or because he's a terrible writer. A straight reading of the paragraph gives the impression that because some people have lost jobs or income, most people are deferring or defaulting on student loan payments. That's obviously untrue and the result of faulty logic. However, Mr. Chung often assumes that everyone else in the world behaves like him (thank you Jesus that's not the case), so he may believe that since he's stopped paying his student loans, everyone else has. Alternatively, he may have been trying to say that most of the people who lost their jobs or lost income are deferring or defaulting on their student loans. If that's why he was trying to say, he did a terrible job.
Due to government shutdown orders, businesses must shut down or operate on a limited capacity. This means business will have to lay off employees or shut down altogether. For many people, their only source of income was the extended unemployment benefits. Business owners may have taken the SBA’s Economic Injury Disaster Loan or the forgivable paycheck protection program loan to cover expenses.
This paragraph serves no purpose and I'm not sure why he included it. Maybe he's getting paid by the word?
While forgiving student loans will be good news for most who are stuck with massive student loans, will Biden’s $10,000 proposal be enough? And will it stimulate the economy in light of the unique challenges presented by the coronavirus? I want to focus on the economic effect (or lack of it) of forgiveness specifically so I will skip the moral arguments for and against forgiveness as well how it will affect people of color.
Of course Mr. Chung isn't going to discuss moral arguments (he's Neitzsche's Last Man after all) or the effect on people of color (he's RACEIST as fuck). But I'm really hoping for some insightful analysis regarding the impact of Biden's student loan forgiveness proposal.
First, let’s look at whether Biden’s $10,000 forgiveness proposal is enough. For those with relatively low student loan debts, this can wipe out a significant chunk of it. This can give them more flexibility with the remaining balance. It will be easier to negotiate a lower monthly payment plan or refinance with a lower interest rate. Or they may decide to cut the daily lattes and avocado toast for a year and shoot to pay off the remaining loans within a certain time.
Wow, I kind of figured that forgiving $10,000 in debt would lower the amount of debt that borrowers had, but I never realized that it meant that they might end up paying less per month. This is deep stuff. Still not sure how he thinks that interest rate is tied to the balance.
But for those with large student loans, forgiving $10,000 will have little or no effect on their finances. Let’s suppose someone has a federal loan balance of $150,000 with the 6.8% interest rate which was the going rate a few years ago. The annual interest alone is $10,200. Similarly, for someone with $250,000 in student loan debt with a lower 4% interest rate, the interest accrual will be $10,000. For those who let interest accrue due to unemployment or making minimal payments, Biden’s $10,000 forgiveness if applied to interest first, will not affect the principal balance.
I certainly never figured that people who had borrowed substantially more than $10,000 would still owe lots of money after having $10,000 of debt forgiven. Way to go Steven! Of course, the only useful thing that Steven could have talked about here is how much less per month someone would pay after having $10,000 of student debt forgiven. Of course, he never discusses this.
Second, will forgiveness boost the economy? It is possible that the psychological effect of forgiving loans would encourage people to spend money more freely. But to stimulate the economy, people must have money to spend. And they must be willing to spend it on goods and services, instead of doing financially prudent things such as paying down debts, saving, or contributing to a retirement account.
I agree with Steven that Biden's proposal won't stimulate the economy, but his reasoning is terrible. Assuming that people who made extremely foolish decisions regarding student debt will suddenly do something financially prudent is idiotic. The person who borrowed $250,000 to get a degree in comparative intersectionality is precisely the idiot who will think that the government wrote them a check for $10,000 and go out and buy whatever stupid people buy these days.
Or to use a more realistic example, suppose someone is on an income-based repayment (IBR) plan and lives paycheck to paycheck spending only on basic necessities. Forgiving student loans will not provide additional money or free up funds for most of these people. So long as they are on an IBR plan, their monthly payment will likely remain the same. And if these people have no discretionary funds left after their expenses, they won’t have any money left to spend.
Now we see why Steven Chung thinks Biden's proposal is a bad idea. He's on IBR and he's smart enough to realize that forgiving $10,000 of his insurmountable student loan debt won't cut his monthly payments since he's already paying less than he owes. His proposal to remedy this "injustice" is predictable.
I think a better idea is to refund student loan payments already made and make them forgivable. This will provide money to people that can be used to pay for goods and services which will stimulate the economy. Providing refunds is also a more fair solution because it will also benefit those who sacrificed to pay their loans in full. Finally, no limitations should be placed on the refund amount for those with higher incomes in the name of fairness if the main goal is stimulating the economy.
I'm totally shocked that Mr. Chung wants the Federal government to write him a check for $10,000. Thankfully this will never come to fruition since it would essentially be a welfare check to educated people. I'm as woke as a brick and I still find that solution distasteful.
The calls to forgive student debt piss me off because it gives the most benefit to those who made the worst decisions. If you borrowed $300,000 and can't get a job that pays well, I don't have any sympathy for you. I have three degrees and I put a lot of thought into getting through it with as little debt as possible. I wanted to make sure that if I didn't become a top-hat-and-monocle-lawyer, I wouldn't have a crippling mountain of debt. The extreme forgiveness proposals like those advocated by Sanders and Warren essentially give people like me the finger.
James Meigs calls this "The Chump Effect" in a recent article. It's a good read, by someone who can actually think and write. I highly recomment it.
https://www.city-journal.org/chump-effect-of-progressive-policies
