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American Prospect: Why Obama-Era Economists Hate Biden’s Student Debt Relief

By dianeravitch
September 10, 2022 //
80

Lindsay Owens and David Dayen note that some of the most outspoken critics of Biden’s decision to forgive up to $20,000 in student debt are Obama-era economists. Republicans have called it “socialism” and worse, but some Democratic economists are also upset. Owens and Dayen attribute their anger to the failure of Obama’s policy to solve the home foreclosure crisis.

They write:

President Biden’s long-awaited decision to wipe out up to $20,000 in student debt was met with joy and relief by millions of borrowers, and a temper tantrum from centrist economists.null

Moments after the announcement, former Council of Economic Advisers Chair Jason Furman took to Twitter with a dozen tweets skewering the proposal as “reckless,” “pouring … gasoline on the inflationary fire,” and an example of executive branch overreach (“Even if technically legal I don’t like this amount of unilateral Presidential power.”). Brookings economist Melissa Kearny called the proposal “astonishingly bad policy” and puzzled over whether economists inside the administration were “all hanging their heads in defeat.” Ben Ritz, the head of a centrist think tank, went so far as to call for the staff who worked on the proposal to be fired after the midterms.

Histrionics are nothing new on Twitter, but it’s worth examining why this proposal has evoked such strong reactions. Elizabeth Popp Berman has argued in the Prospect that student loan forgiveness is a threat to the economic style of reasoning that dominates Washington policy circles. That’s correct. But President Biden’s elegant and forceful approach to tackling the student loan crisis also may feel like a personal rebuke to those who once worked alongside President Obama as he utterly failed to solve the debt crisis he inherited.

Let’s be very clear: The Obama administration’s bungled policy to help underwater borrowers and to stem the tide of devastating foreclosures, carried out by many of the same people carping about Biden’s student loan cancellation, led directly to nearly ten million families losing their homes. This failure of debt relief was immoral and catastrophic, both for the lives of those involved and for the principle of taking bold government action to protect the public. It set the Democratic Party back years. And those throwing a fit about Biden’s debt relief plan now are doing so because it exposes the disaster they precipitated on the American people.

One reason the Obama administration failed to swiftly help homeowners was their obsession with ensuring their policies didn’t help the “wrong” type of debtor.

President Obama campaigned on an aggressive platform to prevent foreclosures. Larry Summers, one of the critics of Biden’s student debt relief, promised during the Obama transition in a letter to Congress that the administration “will commit substantial resources of $50-100B to a sweeping effort to address the foreclosure crisis.” The plan had two parts: “helping to reduce mortgage payments for economically stressed but responsible homeowners,” and “reforming our bankruptcy laws” by allowing judges in bankruptcy proceedings to write down mortgage principal and interest, a policy known as “cramdown.”

The administration accomplished neither. On cramdown, the administration didn’t fight to get the House-passed proposal over the finish line in the Senate. Credible accounts point to the Treasury Department and even Summers himself (who just last week said his preferred method of dealing with student debt was to allow it to be discharged in bankruptcy) lobbying to undermine its passage. Summers “was really dismissive as to the utility of it,” Rep. Zoe Lofgren (D-CA) said at the time. “He was not supportive of this.”

Summers and Treasury economists expressed more concern for financially fragile banks than homeowners facing foreclosure, while also openly worrying that some borrowers would “take advantage” of cramdown to get undeserved relief. This is also a preoccupation of economist anger at student debt relief: that it’s inefficient and untargeted and will go to the “wrong” people who don’t need it. (It won’t.)

For mortgage modification, President Obama’s Federal Housing Finance Agency repeatedly refused to use its administrative authority to write down the principal of loans in its portfolio at mortgage giants Fannie Mae and Freddie Mac—the simplest and fastest tool at its disposal. Despite a 2013 Congressional Budget Office study that showed how modest principal reduction could help 1.2 million homeowners, prevent tens of thousands of defaults, and save Fannie and Freddie billions, FHFA repeatedly refused to move forward with principal reduction, citing their own efforts to study whether the policy would incentivize strategic default (the idea that financially solvent homeowners would default on their loans to try and access cheaper ones).

Virtually everyone involved with the housing system was stunned that the options of cramdown and principal reduction weren’t taken. Banks literally held meetings in expectation of Obama’s team requiring writedowns, until they didn’t.

Instead, the Obama administration rolled out the industry-backed Home Affordable Modification Program (HAMP), relying on the voluntary cooperation of servicers to modify mortgages. The program was, even by the administration’s own modest objectives, a failure, ultimately reaching less than a quarter of the three to four million homeowners it hoped to target. In the critical first two years, the administration did not even spend 3 percent of what they were allotted to save homeowners.

Just as with cramdown, one reason the Obama administration failed to swiftly help homeowners was their obsession with ensuring their policies didn’t help the “wrong” type of debtor. When Obama first announced HAMP in 2009, he said the program would “not reward folks who bought homes they knew from the beginning they would never afford.” The resulting “Goldilocks” proposal, with its focus on weeding out undeserving borrowers, would not be available to homeowners with incomes too high or too low and would be backstopped with voluminous income and financial verifications (in many cases, more than what was required to take out the loan in the first place). Treasury also tweaked the program numerous times as they went along, confusing servicers and borrowers. The barrage of paperwork ground the program to a halt at many servicers, and ultimately nearly a quarter of modifications were rejected on the grounds that incomplete paperwork was provided.

But it was much worse than that. The mortgage servicers used HAMP like a predatory lending program, squeezing homeowners for as many payments as possible before canceling their modifications and kicking them out of their homes. These companies had financial incentives to foreclose rather than modify loans. In one particularly excruciating example, the servicer arm of Bank of America offered its employees Target gift cards as a bonus for placing borrowers into foreclosure.

This was also by design, or at least benign neglect. Then–Treasury Secretary Timothy Geithner candidly told officials that the program was intended to help banks, not borrowers. The purpose was to “foam the runway” for the banks, Geithner said, with homeowners and their families being the foam crushed by a jumbo jet in that scenario. If the goal was just to let the banks use HAMP for their own benefit, it’s not surprising that would come at homeowners’ expense.

And those banks executed their plan fraudulently, using millions of forged and fabricated documents to illegally foreclose on people. Even with this new leverage against the banks, the administration failed to provide equitable relief. A new program, the National Mortgage Settlement, promised one million principal reductions but delivered only 83,000. Meanwhile, millions more unlawful foreclosures ensued, and no high-level executive was convicted in association with any of these crimes.

In short, the policy apparatus ultimately failed to assist the majority of people who sought help, a suboptimal policy outcome by any metric. Student debt relief skeptics like Furman spent the Obama years advocating for privatizing Fannie and Freddie, rather than apologizing for falling so short on dealing with the massive debt overhang, which stunted the economic recovery.

President Biden’s approach has been markedly different and, if well implemented, is poised to be extremely effective. The simplicity of the program design, with its straightforward cancellation thresholds ($10,000/$20,000) and eligibility criteria (Pell status and household income), means the policy should deliver nearly 90 percent of its relief dollars to those making less than $75,000 a year. Will some small amount of relief dollars land in the bank accounts of borrowers who will make higher incomes in the future? Absolutely. Is preventing that outcome more important than delivering relief to 43 million borrowers? Of course not.

It’s not just the policy design that is a rebuke to the old guard’s theory of debt relief; it’s also the rhetoric. Notably, in his 20-minute speech announcing the rollout of the student loan relief program, President Biden didn’t mention “bad debtors” once. He didn’t spend a single breath on the individual failings of borrowers, make any reference to their poor decision-making, or nod to a handful of unscrupulous debtors trying to game the system.

Instead, he talked about the failings of our higher-education system, in which “an entire generation is now saddled with unsustainable debt.” Instead of blaming borrowers, he showed them empathy. Instead of talking about borrowers taking advantage of the system, he vowed to hold “colleges accountable for jacking up costs without delivering value to students” and crack down on “schools luring students with the promise of big paychecks when they graduate only to watch these students be ripped off and left with mountains of debt.” And he headed concerns about moral hazard off at the pass, vowing to “never apologize for helping the working and middle class.”

Moreover, Biden wasn’t afraid to use all of the tools available to him to get results for indebted borrowers. The Obama administration was given funding from Congress, an explicit mandate for foreclosure prevention, and at the end, a settlement with the banks that authorized even more money. They still failed, because they were more interested in deluded notions of “personal responsibility” than acting to avert disaster.

Biden has flipped the Beltway consensus on policy design around debt forgiveness and modeled a path for viewing student debt as a national crisis, rather than an individual failing. It’s a stunning reversal of the Obama-era consensus and one that casts that failed legacy of mortgage debt relief in an even darker light. Biden has shown us there was an easier, softer way all along.

Categories Accountability, Biden, Economics, Education Industry, Equity, Higher Education, Student Financial Aid and Student Debt

Republicans Who Complain about Student Loan Forgiveness Are Hypocrites

By dianeravitch
August 27, 2022 //
33

A number of Republicans received Paycheck Protection Program loans, which were forgiven.

The White House tweeted a response to Republican Congressman Vern Buchanan of Florida, who complained about debt relief for college students. He received a Payroll Protection Program loan from the federal government of $2.3 million. The loan was forgiven.

@WhiteHouse

Congressman Vern Buchanan had over $2.3 million in PPP loans forgiven.

Buchanan had tweeted:

@VernBuchanan

“As a blue-collar kid who worked his way through college, I know firsthand the sacrifices people make to receive an education. Biden’s reckless, unilateral student loan giveaway is unfair to the 87 percent of Americans without student loan debt and those who played by the rules.”

So it’s okay for the federal government to give Congressman Buchanan $2.3 million, which he doesn’t have to pay back, but not to help college kids drowning in debt with a student loan forgiveness of $10,000-20,000?

Republican Mike Kelly of Pennsylvania complained on Twitter:

Asking plumbers and carpenters to pay off the loans of Wall Street advisors and lawyers isn’t just unfair. It’s also bad policy.

Yeah, all those millions of kids who got student loans are rich now, right?

@WhiteHouse tweeted:

Congressman Mike Kelly had $987,237 in PPP loans forgiven.

But that’s not all:

Categories Hypocrisy, Student Financial Aid and Student Debt

Marjorie Taylor Greene Received a Big Federal Loan, Which Was Forgiven

By dianeravitch
August 27, 2022 //
14

Marjorie Taylor Greene was one of many Republicans complaining about President Biden’s decision to forgive $10,000-20,000 of debt that college students owe for taking out federal loans to finance their education.

The White House released a response: Rep. Marjorie Taylor Greene applied for and received a federal Paycheck Protection Program loan of more than $180,000. The loan was forgiven.

Unlike college students who had a debt of $10,000 forgiven, her debt of $180,000 was forgiven. And she complains about them! That’s called chutzpah.

Alternet reports:

Highlighting the hypocrisy of Greene and other Republicans claiming it’s unfair to have loans forgiven at taxpayer expense, the White House also posted to Twitter that U.S. Rep. Matt Gaetz (R-FL), U.S. Rep. Mike Kelly (R-PA), U.S. Rep. Vern Buchanan (R-FL), and other Republicans attacking the administration for its student loan forgiveness program, had massive PPP loans forgiven….

According to ProPublica, Rep. Greene’s family construction business took out a PPP loan on April 10, 2020, for $182,300. In total, including interest, the federal government forgave her and her family’s loan totaling $183,504.

The PPP loans, also known as the Paycheck Protection Program, originated under President Donald Trump and was facilitated via the Small Business Administration. The were $800 billion in PPP loans made, according to NBC News.

Watchdogs estimate billions in fraudulent PPP loans were forgiven.

Categories Accountability, Hypocrisy, Student Financial Aid and Student Debt

Slate: The Long History of Forgiving Debt

By dianeravitch
August 27, 2022 //
34

Republicans are outraged that Biden is forgiving the student loan debt of millions of borrowers by $10,000-20,000. They have denounced loan forgiveness as “socialism,” a “big government giveaway,” and worse.

They are on the wrong side of history and politics.

I can tell you from the two years I worked in the U.S. Department of Education that there is a student loan industry that has a powerful lobby. They want student debt to be as high as possible and they want the rates to be as high as possible. Biden’s decision is very disappointing to their lobbyists.

Zachary D. Carter writes in Slate that there is a long history of forgiving debt. This is a terrific article. I urge you to read it.

He begins:

In 1920, the world’s most famous economist, John Maynard Keynes, was digging through old books on the economy of the ancient world, when he discovered something startling. All his life he had been taught that civilization depended on ironclad financial certainty. Without a stable currency and dependable debt contracts, commerce could not exist. Governments that meddled in such matters were thought to be asking for social chaos.

But the documents he perused on Ancient Greece, Rome, Babylon, Assyria, and Persia showed him something else entirely. Throughout history, political leaders had abolished debts and managed the value of their currencies—another way to revise debts—as routine matters of government policy. Keynes was electrified. A year earlier, he had staked his reputation on a call to cancel the largest debts the world had ever seen—those accrued by the governments of Europe during World War I. If these debts were not cleared, Keynes had argued, the international trading system would break down, leading to misery and another war. Predictably, the financial establishments on two continents responded to this apparent heresy with alarm. Now Keynes had discovered precedent for his ideas — thousands of years’ worth, from Hammurabi in ancient Babylon to Solon of Athens.

[As a side note, the Treaty of Versailles imposed massive debt on Germany. Had that debt been forgiven, there might have been no World War II.]

Indeed, debt relief has always been the handmaiden of debt itself. In the United States we have a formal legal process for eliminating nearly all forms of debt: bankruptcy. When debts become unbearable, people file for bankruptcy to have them discharged in court. In the 15 years preceding the pandemic, more than 14.3 million people filed for bankruptcy, and in the decade prior to the pandemic, more than 20,000 businesses filed for bankruptcy every year, with a high water mark of 60,837 in 2009. Debts are discharged every day in the United States, and have been for decades.

Indeed, debt relief has always been the handmaiden of debt itself. In the United States we have a formal legal process for eliminating nearly all forms of debt: bankruptcy. When debts become unbearable, people file for bankruptcy to have them discharged in court. In the 15 years preceding the pandemic, more than 14.3 million people filed for bankruptcy, and in the decade prior to the pandemic, more than 20,000 businesses filed for bankruptcy every year, with a high water mark of 60,837 in 2009. Debts are discharged every day in the United States, and have been for decades.

Not that you would know from the apocalyptic conservative outrage emanating from social media and cable television this week. When President Joe Biden announced his new student loan relief program on Wednesday, Senate Majority Leader Mitch McConnell decried it as “socialism” and Utah Sen. Mitt Romney called it a naked attempt to “bribe the voters.” Reason magazine’s Robby Soave declared it a “fuck you to every financially responsible person in the country.” These reactions belie centuries if not millennia of economic history.

Capitalism would collapse without debt relief systems. Businesses get in trouble all the time—both good businesses that would work fine without a few onerous debt deals, and bad businesses that need to be liquidated or restructured. Sometimes bad things just happen. People get divorced. They get injured and are overwhelmed by medical bills. They get laid off. They have to pay for a parent’s funeral or care for children with special needs. And yeah, some people just don’t know how to manage their money and buy things they can’t afford. But we do not consign such people to never-ending financial servitude as a result of unforeseen circumstances, or even totally reckless spending habits. We have a formal process to eliminate debts and start over, with a reasonable chance of living a healthy financial life.

But not for students who borrow money to attend college. In 2005, Congress passed a law that made it next to impossible to discharge almost any form of student debt. Even the most creative consumer lawyers estimate that only about $50 billion—less than 3 percent of the $1.75 trillion in outstanding student debt—had the potential to be wiped away, but only if students could persuade a court that they had been egregiously wronged, by say, non-accredited programs or institutions that didn’t actually offer degrees.

Biden’s new student debt relief program exists because student debt is currently ineligible for the ordinary process that Americans use for extinguishing excessive debts….

Nor are the recipients of Biden’s aid particularly wealthy. The plan flatly excludes anyone who makes more than $125,000 a year from participation. According to an analysis by the University of Pennsylvania’s Penn Wharton Budget Model, about half of the money will go to borrowers in the bottom half of the income spectrum, with only 2.5 percent of folks breaking into the top 10 percent receiving relief. The median personal income in the United States—the 50 percent line—is $35,800. This makes sense once we consider the actual demographics of the typical American college student, who is not an Ivy Leaguer bound for the 1 percent. About 40 percent of all undergraduate students attend community colleges, about one-third of whom take out student loans to help pay for their education. The average community college borrowergraduating with more than $13,000 in debt. There are also racial disparities in student debt: According to a Brookings Institute analysis, Black borrowers shoulder roughly double the amount of debt to attend college that white borrowers do.



Categories Biden, Education Industry, Higher Education, Student Financial Aid and Student Debt

Cong. Rosa DeLauro Applauds Biden Action to Relieve Student Debt

By dianeravitch
August 24, 2022 //
28

Connecticut Member of Congress Rosa De Lauro is chair of the House Appropriations Committee, one of the most powerful members of Congress. She is a staunch friend of working people and public schools.

WASHINGTON, DC – Chair of the House Appropriations Committee Rosa DeLauro (CT-03) today released a statement following President Biden’s announcement of his student debt plan.

“Americans are living paycheck to paycheck. The biggest corporations are using their money to rig the game, and costs are on the rise.

“I applaud President Biden for taking a necessary step today to level the playing field for working Americans by cancelling $10,000 in student debt for borrowers who earn under $125,000 a year and up to $20,000 for Pell Grant recipients. This will completely wipe out debt for millions of borrowers and give many the economic security they need to invest in a small business, buy a home, or simply just take care of their families.

“Today’s announcement builds on historic actions by the Biden administration to provide student debt relief to borrowers in need. By discharging loans for borrowers ripped off by for-profit colleges, making administrative improvements to the Public Service Loan Forgiveness Program, and canceling loans for permanently disabled borrowers, the President has already approved $36 billion in student loan relief. In addition, the Biden administration is drafting improvements to income-driven repayment programs, including proposals I have pushed for in my Affordable Loans for Any Student Act, so that no borrower has to struggle to make monthly payments.

“Democrats in Congress and President Biden are delivering on commitments to make college more affordable, make student loan repayment manageable, provide relief for those in need, and hold predatory colleges accountable for ripping off students. Americans need a government that works for working families and the vulnerable – not one that answers to the wealthiest and biggest corporations. Today’s announcement is a huge step toward dealing working Americans back in.”

 

# # #

delauro.house.gov

Categories Biden, Education Industry, Education Reform, Higher Education, Student Financial Aid and Student Debt

Biden Cancels Student Debt for Millions of Debtors

By dianeravitch
August 24, 2022 //
102

President Biden issued sweeping student debt relief for people earning less than $125,000 a year.

The Washington Post reports:

White House officials are planning to cancel up to $20,000 in student debt for recipients of Pell Grants as part of their broader announcement on Wednesday of student debt forgiveness, four people familiar with the matter said.


The extra debt forgiveness for Pell recipients would be in addition to the expected cancellation of up to $10,000 in student debt for most other borrowers. The White House’s plans are only expected to apply to Americans earning under $125,000 per year, or $250,000 per year for married couples who file taxes jointly, the people familiar said.


Roughly 43 million federal student loan borrowers would be eligible for some level of forgiveness, including 20 million who could have their debt completely canceled, according to internal documents shared with The Washington Post. The White House estimates that 90 percent of relief will go to people earning less than $75,000.

Categories Biden, Higher Education, Student Financial Aid and Student Debt

Michael Hiltzik: Why Relieving Student Debt Would Not Cause Inflation, But Grow Economy

By dianeravitch
August 24, 2022 //
26

Michael Hiltzik is my favorite columnist in the Los Angeles Times. He recently wrote a wonderful column explaining patiently why canceling some or all college student debt would not be inflationary, as Republicans claim, but instead would be good for the economy.

He writes:

With a deadline looming in less than two weeks for President Biden to decide what to do about student debt, it shouldn’t be surprising that conservatives have been agitating with increasing intensity against relief for the borrowers.

Among their principal arguments recently is that debt relief would be inflationary.

The deficit hawks at the Committee for a Responsible Federal Budget, for example, fretted last week that forgiving even $10,000 in student debt per borrower would be so inflationary that it would destroy a decade’s worth of inflation reduction from Biden’s newly enacted Inflation Reduction Act.

Student debt cancellation will increase the wealth of millions of Americans who need it the most and promote racial equity — all without increasing inflation.

— Mike Konczal and Alí Bustamante, Roosevelt Institute

A bill filed by Republican members of Congress Elise Stefanik of New York, Patrick McHenry of North Carolina and Jason Smith of Missouri cites canceling student debt as among “harmful economic policies” by the Biden administration that have “exacerbated inflation and led to skyrocketing prices.”

I’ve written about the fatuous arguments against student debt relief before. The inflation angle is relatively new, however, presumably because inflation is top of mind for voters as we approach the midterm elections. It’s natural, in a way, for opponents of debt relief to bootstrap this kitchen table issue to their long record of opposition.

As it happens, however, they’re wrong. Canceling student debt, even at higher levels, won’t drive inflation. The critics are using faulty math to make their point.

“Student debt cancellation will increase the wealth of millions of Americans who need it the most and promote racial equity — all without increasing inflation,” according to Mike Konczal and Alí Bustamante of the Roosevelt Institute, who expertly refuted the CRFB’s analysis the day after it appeared.

Before getting into the economics of the issue, a few words of context.

Biden’s deadline actually applies to only a portion of student debt policy: the forbearance that has been granted borrowers since March 2020 in recognition of the burdens of the pandemic.

Since then, borrowers with federally backed loans (which is more than 90% of the indebtedness ) haven’t had to make payments, and interest hasn’t accrued on unpaid balances in that time.

Under current policy, the payment freeze will end on Aug. 31. Biden could extend it by executive order; the Washington consensus is that he will do so, perhaps to the end of this year so payments won’t have to resume prior to the election

The other aspect concerns cancelling student loans. For many of the 45 million borrowers currently owing a total of about $1.8 trillion today, this issue is far more consequential.

Biden pledged during his presidential campaign to forgive $10,000 per borrower. Progressives such as Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) have advocated cancelling $50,000. Others support cancelling full balances for some middle- and low-income borrowers. That decision doesn’t have to be made immediately, though some Democratic advocates think the policy would be favored by Democratic voters in November.

Some traditional arguments against student debt relief can be easily dismissed. One is that forgiving debt today would be unfair to borrowers who shouldered the sacrifice of paying off their loans. As I wrote in the past, this is the argument from pure selfishness and a formula for permanent governmental paralysis.

The truth, of course, is that in a healthy society government policy moves ahead by taking note of existing inequities and striving to address them. Following the implications of the “I paid, why shouldn’t you” camp to their natural conclusion means that we wouldn’t have Social Security, Medicare or the Affordable Care Act today.

The unfairness argument also overlooks the generations of college students whose education was financed by taxpayers to a far greater extent than today. Tuition at the University of California, for example, was free to state residents from its founding in the 1860s until 1970.

UC tuition today is $13,104 per year for residents and $44,130 for nonresidents, and constitutes what the UC says is its “largest single source of core operating funds.” Should today’s tuition-burdened students demand back pay from those pre-1970 enrollees?

Another common argument is that debt cancellation would be regressive — that is, it would disproportionately benefit the rich. The heart of this argument is that wealthier households carry more debt than low-income households, so they would gain more from reducing their balances.

But that’s math-driven misconception. The truth is that the student debt burden falls much heavier on lower-income borrowers than the affluent.

Contrasting borrowers in the poorest 10% of income earners with those in the richest 10%, Laura Beamer and Eduard Nilaj of the Jain Family Institute showed that although “higher-income groups experience higher median debt burdens ($23,160 for the richest decile and $16,094 for the lowest-income decile), this difference is small compared to the difference in median incomes ($60,193 for the richest decile and $16,770 for the lowest-income decile).”

Even cancelling $10,000 in debt would be a greater boon for lower-income borrowers than the rich. Among borrowers with $20,000-$40,000 in income, 234,000 carry balances below $15,000, Beamer and Nilaj calculated. About 57% of borrowers in that income range have balances of less than $20,000, compared to 43% of those with income of $75,000 or more.

Nor is there any doubt that debt cancellation would have a strong impact on racial and ethnic economic inequality. About 75% of Black borrowers have current loan balances greater than the original loans, due mostly to difficulty in making repayments, compared to 50% of white borrowers.

Once repayments resume, the New York Federal Reserve Bank reported in April, “lower-income, less educated, non-white, female and middle-aged borrowers will struggle more in making minimum payments and in remaining current.”

That brings us back to the newest wrinkle in the anti-relief argument: That debt relief will be inflationary and add to the deficit.

The CRFB is perhaps the most ferocious deficit scold among conservative think tanks in Washington. It’s a full-spectrum fiscal critic. To its credit, it was critical of the GOP’s massive tax cut for the rich in 2017, but it has also pursued benefit cuts in Social Security and Medicare, a reflection of the long patronage of the late hedge fund billionaire Pete Peterson, who conducted a long campaign to shrink those programs.

The CRFB analysis of student debt relief asserts, “Simply extending the current repayment pause through the end of the year would cost $20 billion — equivalent to the total deficit reduction from the first six years of the IRA …. Cancelling $10,000 per person of student debt for households making below $300,000 a year would cost roughly $230 billion.”

Put these two options together, the group states, and “these policies would consume nearly 10 years of deficit reduction from the Inflation Reduction Act.” Its analysis further states that “debt cancellation would boost near-term inflation far more than the IRA will lower it. A $10,000 cancellation, according to the CRFB, could add .15 percentage points to the inflation rate “up front and create additional inflationary pressure over time.”

Konczal and Bustamante found some suspect math in this reasoning — specifically the comparison of apples to oranges by applying formal federal budget rules instead of real-world accounting.

Under the formal rules for credit programs, cancellation of debts must be treated as though the foregone interest and principal payments all occur immediately, in year one, when in fact they’re spread over the life of the loan. The Inflation Reduction Act, similarly, is treated as though all its inflation effect occurs in the first 10 years, when it’s also spread over two decades or more.

The CRFB’s analysis therefore overstates the impact of debt cancellation on the IRA’s inflation reduction. This flaw should be obvious. Spread over the decades-long terms of student loans, the foregone debt payments come to about $13 billion a year.

“It’s about allowing borrowers to keep $13 billion a year in income,” Bustamante told me. “That comes to about 0.08% of total personal consumption.” For an economy with about $16.5 trillion in annual personal spending, $13 billion is “insignificant when it comes to inflationary pressure.”

Nor is there any evidence that people would go out and spend that money, creating inflationary demand. The evidence from more than two years of debt forbearance thus far is that borrowers have used it to improve their household balance sheets, paying off high-rate credit card debt and saving the rest.

That’s not even to mention what has been driving inflation over the last year. It’s not demand-side personal consumption, but constraints such as supply-chain disruptions and restricted supplies of oil. Both factors have decreased in recent months, which is why the month-over-month inflation rate in July fell to 0.0%. (The Federal Reserve may be making the same mistake in its inflation-fighting campaign.)

The power of inflation as a scare word just now must explain the rhetoric employed by Stefanik, McHenry and Smith when they introduced their attack on debt relief in July.

Stefanik represents the sixth-poorest congressional district of New York’s 31, with a median income of $57,320. McHenry’s is the fifth-poorest in North Carolina, with a median income of $53,189. Smith’s is the poorest in Missouri and the 22nd-poorest of all the 435 districts represented by fully voting members.

That suggests that their own constituents would be in line for the most help from student loan forbearance and cancellation, including help dealing with prices at the pump and the supermarket. In this case as in many others, we must ask who these politicians are working for — certainly not the people who elected them.

Clearly, student debt relief will be a wealth-producing, economy-growing initiative. It won’t create unfairness, but redress economic injustice that has been building for decades. Biden’s proper course should be obvious.

Categories Education Industry, Funding, Higher Education, Student Financial Aid and Student Debt

Steve Nelson: Farewell to the Worst Secretary of Education Ever!

By dianeravitch
December 30, 2020 //
13

Steve Nelson was head of school at the Calhoun School. He is now in retirement. He writes frequently about the need for child-centered education.

“RESIST!”  Bernie Sanders? AOC?  Malcom X? Saul Alinsky?

No, this was Education Secretary Betsy DeVos’s plea to Education Department staffers as she ends her term in office. As reported in The Hill, she specifically implored them to “Be the resistance against forces that will derail you from doing what’s right for students.”  DeVos evoking the language of progressive activism is rich – almost as rich as DeVos herself.

She has gotten scant attention in the chaos of these last days.  It seems unjust to allow her to go so quietly from the party.  It is only in the shadow of Bill Barr, Scott Pruitt, Michael Flynn, Wilbur Ross, Steve Bannon, Paul Manafort, Mike Pompeo, Ben Carson, Stephen Miller and many others that DeVos’s breathtaking awfulness would go uncelebrated.

I am here to right that wrong.

As with other Trump appointees, her most luminous qualification for the position was absolute disdain for the mission she was tapped to lead.  She had demonstrated  decades of hostility toward public education and her antipathy has continued unabated on the job.

Her educational “philosophy” is built on several premises that have informed her life’s work. 

Her education activism and support of reform are, in her words, “a means to advance God’s Kingdom.”   She has proclaimed that “the system of education in the country . . . really may have greater Kingdom gain in the long run.”  To this end she has been a tireless advocate for voucher programs which allow parents to use tax dollars for their children’s enrollment in religious schools.  In Florida, for example, 80% of vouchers, to the tune of $1 billion, go to religious schools, where evolution is just theory, gay students are unwelcome and every course is offered through a Christian lens.

Her advocacy for charter schools is built on the second premise: Profit is a divine right and any budding entrepreneur who can walk and chew gum is qualified to give education a shot. In her home state of Michigan this has resulted in a checkerboard of charter schools that fail as often as Trump casinos and where the odds of getting a good education are like playing the roulette wheel.  The shifting of public money to charters has hollowed out the public system in Detroit, for example, where kids of color are often shuffled to and from a half dozen startups and shutdowns in just one school year.  To extend the simile, it’s a bad deal for children.

This manifestation of her “activism” seems very much like the source of her immense wealth:  Amway.  The very American Amway system also allows  any budding entrepreneur who can walk and chew gum to give Amway a whirl. The odds of success are similar to the odds of success for charter startups – meaning very low indeed.  Unless, of course, you are at the top of the pyramid. Every sucker who loses is a gain for the house.  

Amway aside, her business acumen is a bit suspect.  She was a major investor in Theranos, a remarkable scam whose founder is facing felony counts of fraud.  She and her husband are also up to their corrupt ears in another corporate scam, Neurocore, which has been charged for using unapproved (FDA) devices and deceptive (FTC) marketing.  As a kicker, they invested in a Broadway show that closed after three weeks.  Like her patron saint Trump, it’s just so much winning.

I would be remiss if not pointing out that she is, in these respects, an iconic representative of the contemporary Grand Old Party which is committed to the same principles: that we are a Christian nation and that everything done for private profit is de facto better and more efficient than anything done for public good.

A few other highlights:

She supports using federal funds to arm teachers.

She dramatically altered Title IX to give more rights to boys and men accused of sexual misconduct and to significantly limit the authority of educational institutions to support women or use their own discretion.

In her confirmation hearing, she knew nothing about the Individuals with Disabilities Education Act (IDEA), saying states should do whatever they want.

She called historically black colleges and universities (HBCUs) “pioneers of school choice,” seeming to miss that they were the result of segregation and that they were founded because black students had no choices.  It’s like admiring a particularly fine porcelain drinking fountain in Jim-Crow-era Alabama and praising it as a pioneer in hydration choice.

President-elect Biden has selected Dr. Miguel Cardona to replace DeVos.  He is a vast improvement.  For those who continue to work  in the Department of Education, we must say, “Resist!”

Categories Betsy DeVos, Budget Cuts, Charter Schools, Cruelty, School Choice, Student Financial Aid and Student Debt, U.S. Department of Education, Vouchers

Dr. Leslie T. Fenwick for Secretary of Education

By dianeravitch
December 21, 2020 //
40

President-Elect Joe Biden will soon announce his choice for Secretary of Education. He promised to choose a person with experience as a teacher. He said he wants a Secretary who is committed to public education. Here is my choice.

I can’t think of anyone better qualified to be Secretary of Education than Dr. Leslie T. Fenwick, other than Dr. Linda Darling-Hammond, who is chair of the Biden education transition team and has taken herself out of the running.


Dr. Leslie T. Fenwick is Dean Emeritus of the School of Education at Howard University.


She has been a teacher, a teacher educator, a scholar, and a dean. She taught middle school science in Toledo, her hometown. 


She understands the most important needs of American education: adequate and equitable funding; experienced teachers; and a commitment to equity and inclusion.


I have watched her lectures online, and I was blown away by her wisdom, her articulateness, and her deep understanding of the needs of children, teachers, and schools.


Leslie Fenwick is steeped in knowledge of teaching and learning, and she knows the details of federal policy. 


She is the perfect person to clean up the mess that Betsy DeVos created, to reverse four years of an administration that sought to demolish civil rights protections, to defund public schools, to fund private and religious schools, and to impose financial burdens on college students who are deep in debt or were defrauded by for-profit institutions.

After twenty years of failed federal policies of high-stakes testing and punishment for schools and teachers, American education needs bold and forceful leadership, not incremental change.


Leslie Fenwick knows that public schools are an essential element of American democracy. They are community institutions that belong to the public, not to entrepreneurs or corporate chains. 

She will support schools instead of closing them. She will support teachers instead of threatening them.

She is a strong and clear-thinking leader.


She respects educators.


She is an inspiring speaker.

She would be the ideal Secretary of Education for the Biden administration. 

If you want to show your support for Dr. Fenwick, please sign the NPE Action petition and tweet your support:

Here is the petition: https://actionnetwork.org/petitions/dr-leslie-fenwick-for-us-secretary-of-education

For twitter: contact @joebiden @DrBiden @Transition46


Categories Betsy DeVos, Biden, Civil Rights, Darling-Hammond, Linda, Education Reform, Hope, NCLB (No Child Left Behind), Race to the Top, Standardized Testing, Student Financial Aid and Student Debt, U.S. Department of Education

Capital & Main: Five Ways to “De-DeVos” the U.S. Department of Education

By dianeravitch
December 21, 2020 //
15

After four years of Betsy DeVos and her antagonism toward public schools, civil rights protection, and students who were defrauded by for-profit colleges, the U.S. Department of Education needs a thorough makeover. A house-cleaning. A thorough disinfecting.

Larry Buhl of Capital &Main describes in this article what the Biden administration must do to de-DeVos the Department.

Is it possible to reverse the ways in which she attempted to destroy public schools, civil rights enforcement, and fair dealing with college students who have borrowed more than they can ever pay back?

That is the job facing the new Secretary of Education. Bring out the Lysol!

Categories Betsy DeVos, Civil Rights, Education Reform, Student Financial Aid and Student Debt, Supporting public schools
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