Canceling student debt is super-cheap and politically necessary
Canceling student debt is super-cheap and politically necessary
It's that or slap a $400-a-month tax on 50 million Americans
Welcome to the big Sunday edition of Progressives Everywhere!
It’s hard to believe that we’re just days away from another Thanksgiving, the second to take place under the cloud of the Covid-19 pandemic. As was the case last year, the number of positive tests and deaths are climbing in concert with the temperature’s decline, though this year, the body count belongs as much to mendacious political actors as it does to the virus itself.
Florida Gov. Ron DeSantis and his counterpart in Texas, Greg Abbott, have led the way in encouraging viral disinformation and passing reckless laws in response to the outrage they gin up, effectively and knowingly sacrificing tens of thousands of their constituents on behalf of their political ambitions. Republicans are also in the process of turning a majority of states into one-party autocracies, seizing the ability to overturn elections, encouraging mass violence, and coordinating further attacks on what remains of our endangered political institutions.
Worse, inaction seems to be the prevailing response. Zoom out from the exhaustive coverage of petty negotiations in DC, and it’s utterly insane that Democrats are considering just allowing Republicans to rig elections for the next decade. This isn’t just two narcissist senators, it’s a systemic failure. I’m continuing to work on voting rights projects, and I’ll share my next one soon, but in the meantime, call your senators and make sure that they know that their feckless condemning of GOP terror tactics doesn’t mean anything if they’re not willing to take action on voting rights.
But don’t get too down, because Macy’s Thanksgiving Day Parade this year will feature a loving new version of the classic Ronald McDonald float: “Ronald is sharing his heart with us at a time when we all need some extra love and smiles and inspiring spectators to, ‘see a smile, share a smile,’” McDonald’s PR told the press, presumably on behalf of the giant clown himself.
By most standard measurements, the economy is steadily improving. Job growth is on a steep upward trajectory, pay is rising for middle-class Americans, and the retail sector is already surging. Most importantly, workers are experiencing their first real extended leverage over employers in generations. And yet, thanks to price inflation driven in large part by corporate greed (and the media’s obsessive drumbeat of context-free pseudo-populism), more than 70% of Americans are telling pollsters that they believe the economy is heading in the wrong direction.
And if the price of milk is driving media coverage and stoking voter outrage, just imagine what they’ll say in February, when nearly 50 million Americans begin to receive monthly bills for $400 or more.
The pause on required student loan payments over the course of the pandemic has provided a crucial lifeline to those 50 million Americans, who together owe $1.7 trillion to the federal government. As I outlined in a story early this year, exploitative interest rates, the skyrocketing costs of higher education, decades of stagnant wages, and historic income inequality have led to an 18% rise in the median student debt balance since 2009.
According to a recent study of 33,000 education debtors, the pause on payments and compounding interest was crucial to the financial wellbeing of 88% of Americans, and not simply because it enabled them to save or win more comfortably (the horror!). An astounding 87% of respondents say that the pause allowed them to pay off other bills and debts.
The extent of help cannot be understated — 27% of the respondents, who make an average of $63,000 per year, told survey proctors that when student loan payments begin again, they’ll be forced to send at least a third of their monthly income to the federal government. Many others will be on the brink of financial collapse:
44% of respondents said they are in default on their student debt and/or could not afford to make payments
45% described their financial wellness as poor or very poor.
The top line number is even bleaker: 89% say they aren’t financially secure enough to resume loan payments.
The aforementioned inflation and the absurd housing market that has sent rent and mortgage rates soaring will only continue to make things more difficult for Americans, even with the good job numbers and slowly improving salaries.
Should it pass the Senate, the Build Back Better Act could help to alleviate some of the economic hardship being felt by Americans at this moment. The direct cash payments, tax breaks, and job opportunities should be particularly helpful, but the time it will take to implement the programs and policies will only allow the status quo to fester and worsen. Further, if the American Rescue Act is any indication, some of the funding may not reach people at all.
The Democratic caucus’s refusal to budge on the filibuster — Sens. Manchin and Sinema are the infuriating holdouts on voting rights, but a dozen other senators oppose larger reform — dictated that just about all of President Biden’s economic agenda had to be passed through reconciliation. A majority only gets a few reconciliation bills per Congress, and with strict limits to what can be included in those bills, the conservative Democrats handicapped what could get done even before negotiations.
As a result, the initial Build Back Better bill was loaded up with each of Biden’s promises, and over the course of an agonizing few months, voters watched conservative Democrats publicly execute one popular promise after another. Instead of a resounding victory, people will always be aware of what was not included and what could have been. Policies important to young people were among the most brutally decapitated, including transformational climate legislation and free community college, the latter of which has been excised entirely.
It’s no wonder then that Biden’s approval rating is sinking precipitously amongst voters under 30, a constituency that turned out in record numbers last year to win him the election. The anger and frustration are growing palpable, having already helped lose Democrats the governor’s mansion in Virginia, and the disaffection will increase exponentially when student loans, which impact people of all ages but are most concerning for young people, become due again. After two years off, the return of student debt payments will essentially function as a massive new monthly tax, violating Biden’s promise that no one making under $400,000 a year would be subject to a federal tax increase.
Then again, the Biden Administration could use its power to cancel student debt, avoid a massive new tax on 50 million Americans, and win back the faith of young voters across the country. This would require a significant reversal of the White House’s current approach, both in public and behind the scenes, but there’s no reason why that couldn’t happen — theoretically, anyway.
As Braxton Brewington, a leader of the activist group known as the Debt Collective, told Progressives Everywhere in this week’s interview, the administration knows that it has every legal right to cancel that debt.
The Debt Collective, which also functions as a debtor’s union, has for years been working to move the needle on abolishing predatory debt on rights that are too often treated like commodities. It has purchased and released working people from millions of dollars in medical and carceral debt, and has been leading the way in the ongoing pressure campaign that aims to convince the White House to turn the pause on student debt into total cancellation. At this moment, the movement’s argument has never been stronger.
Where does the debate on student debt cancellation stand right now? Is the White House moving any closer to changing its mind?
The national narrative has shifted. I mean, we've been working on student debt for years, and now, just so many people are confidently saying that Biden has the authority to cancel student debt. That was something that was very much laughed at just a couple of years ago.
Internally in the White House, what we're hearing is that there is a very deep opposition to student debt cancellation, which we think is rooted in a fundamental misunderstanding of how student debt cancellation works, all the way to Biden himself. In town halls, he's pedaled every myth that you could possibly pedal about student debt cancellation, like who benefits from it, how much of a crisis it is, and this idea that anyone who has student debt must have graduated from college, which then means they must be making a lot of money, which must make it easy to pay off.
Which myths are being most often presented as reason to not cancel the debt?
To Biden, it sounds like a giveaway to wealthy people. And that’s probably because he's thinking about his network of like, wealthy Penn graduates, and that's just not representative of who has student debt. Biden has said [cancellation] would be help for people who went to Ivy League schools. First, the idea that people are not deserving of student debt because they went to an Ivy League school, we obviously reject. Everyone deserves debt cancellation, but that’s not who this mostly is.
We've also heard from some Democrats who just are still trying to wrap their heads around this idea. They believe that canceling student debt means it will cost the full cost of outstanding student loans. So they believe if there's $1.8 trillion of student debt, it will cost the economy $1.8 trillion to cancel student debt. And we have to explain that canceling debt costs what you can expect to get back from the debt, which is nowhere near $1.8 trillion because people aren't paying their loans back. The government incentivizes people to not pay their loans back because they know people cannot pay the loans back. That's why we have all of these complicated plans that incentivize people to not pay back for literally decades.
Legal authority is also a big one. Nancy Pelosi, she corrected it a couple of days later, but she made a bunch of headlines by saying Biden can't simply just cancel student debt because he doesn't have the legal authority. And there are people who do believe he has legal authority, but say that it's gonna get wrapped up in courts, to which we say there is standing for that. That's not how prosecutorial discretion works.
Republicans genuinely do believe that higher education is a commodity, which is why they don’t support free college. They believe that if college is free for everyone, that means everyone will go, and that will mean a degree will be worth nothing. This is just not how the rest of our education system works, including preschool if Democrats pass their Build Back Better bill.
The economy actually penalizes education right now if you can’t pay upfront.
People also say that if you have student debt, well, you shouldn't have gone to college for that worthless art degree. It stems from this Republican idea that if you didn't go to school for STEM, it was a waste of time. But there are so many folks who went to school for some type of STEM major that are truly not reaping the rewards. Dentists are some of the people that are really losing out on the cost of student debt. And lawyers, if you don't go into corporate law, you're kind of screwed.
I believe the cost of tuition has risen eight times faster than wages. I don't know how else to say that it is unaffordable. We're not making enough money.
So there was recently some news about the now-infamous, mysterious memo that the White House ordered from the Department of Education on whether or not he had the authority to cancel student debt. What happened?
On April 1st, the White House told the public that Biden had asked for a memo outlining whether or not he has the authority to cancel student debt. We assumed there would be some recommendations, too. They said it would happen in a few weeks, but months went by, so we requested documents through the Freedom of Information Act.
What we learned is that there was a memo that was drafted by the General Counsel of the Department of Education that was seen by the White House on April 8 at the latest. We also got a slew of emails of back and forth between Department officials, and most of this is redacted, but you can assume based even just off of the title of their emails that they have some opposition to the Rubinstein memo, so it seems like they’re in favor of cancellation. It also seems like they might be citing the HEROES Act as the authority to cancel student debt.
We don't need this memo to know whether Biden has the authority to cancel student debt, because the law is clear — and also because the Biden administration is already canceling some student debt. So they would have to come around and tell the world that what they have been doing is illegal. And I just that is politically unlikely. So the memo was probably less about the legal authority and more a political decision, recommendations from either DOJ or the Department of Education as to how much student debt should be canceled and who it should be canceled for. It's a political decision at this point.
My uneducated fantasy is that maybe Biden pulls the trigger sometime later next year, when Congress gives up on legislation and the midterm elections are really begin to heat up, especially if it’s obvious that Democrats are losing. It’d be an easy shot in the arm, no?
I hear a lot of people say that and it seems to me like optimistic thinking that assumes a lot of things. It assumes that Democrats want to win and that Democrats believe canceling student debt will get them there.
When they announce cancellations, it takes months and months and months for it to actually hit people's accounts. They announced cancellation for certain people in March, and we're still pestering them because these people's accounts haven't changed. So logistically, if that were the plan, it’s something that they’d want to do as soon as possible so people could like actually see it hit their accounts before an election.
We’re hoping that maybe they just can't multitask and they're waiting for Build Back Better to pass before they move on to the next big piece of agenda fulfillment. I'm sure that it’s taking up all of their oxygen at the White House, trying to pass a very big bill, which is great.
But I also think that really what it is, is that they just don't want to cancel student debt and they have to be pressured into doing it. There was reporting from months ago that there was literally a back and forth between Department of Education officials and the White House in which the Education department officials were like, “we need to extend the payment pause” and the White House was said basically that “we don't want to extend the payment policy because we think it will hamper our economic messaging and it'll make us look like the economy is not recovering. So if we can turn on payments, that will prove to everyone that the economy is roaring.”
You just bought $3.2 million in debt and canceled it to free 20,000 people of fines and fees stemming from interactions with the justice system. How did you make that happen?
We are very much known for student debt, but we have always been a household debt, we use that framing, not consumer debt, household debt organization to abolish what we call unjust debts. So we bought private probation debt, that that's mostly for people spread across the south, and then we also developed this tool that will eliminate bail debt specifically in the state of California, just because they have such high amounts of bail compared to the national average, and have better consumer protection laws compared to most states.
We have in the past about student debt, we’ve bought medical debt, we’ve bought payday loans. We’ve bought credit card debt. And we will continue to do it in the future because of how devastating the pandemic has been. There's all this Shadow Debt out there that really exists where people are going into credit card debt. There are stats that say that certain people don’t really have back rent debt, but they do, it’s just credit card debt sufficing for their rent, and that’s what we call Shadow Debt. And so we aim to buy other debt types as well to buy and erase them to give people relief.
Buying and forgiving debt is an act of solidarity, we are genuinely trying to improve people's lives when we can. We also really like to get people to question debt, how it operates, and what they're told that they owe, to challenge the phony morality of debt. And so a lot of people, after we buy these debts and erase them for such an extremely low price, they’re like, wait a minute… Can I get my medical debt erased? Or with my mortgage, is this house even worth what I thought it was worth if you can just buy debt cheap on a shady market?
It really pushes a conversation of abolishing different debt types, and also making a lot of things public goods, specifically housing, which I think is a really big conversation to have. And for student debt, they see it’s been paused for two years, and the sky hasn’t fallen.
If you were to try to buy all the student debt in the country, what would it cost?
Wow, I’ve never tried to figure that out… Well, you can buy debt for three pennies on the dollar, so whatever is 97% off of $1.8 trillion. Maybe the Debt Collective can negotiate with the US government to buy all of that debt because that would actually be a reasonable buy [Editor’s note: It’s less than $54 billion, whereas the Build Back Better Act’s SALT tax cut gives away $280 billion to some of the wealthiest Americans]. It would probably be cheaper than 97% off because usually private companies have incentives to get money back, as opposed to the federal government, which incentivizes people to not pay back their loans. That’s why cancellation would be so economically beneficial, because that money has already been paid out, and it's not being collected.
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