Student Loans

The Student Loan Forgiveness Fiasco 

Plus: Spider study sheds light on how misinformation spreads, Airbnb regulation ruled unconstitutional, and more...

|

students graduating
(Photo by Pang Yuhao on Unsplash )

President Joe Biden declared yesterday that COVID-19 provides a legal basis for wiping out millions of people's student loan debt, to the tune of hundreds of billions of dollars. Anyone making under $125,000 per year will be eligible for the student loan forgiveness program, which will allow for the erasure of up to $10,000 to $20,000 in debt per person. And any which way you look at it, this is a bad move.

There are legal reasons to be wary. Such a huge undertaking would typically be something set out in legislation approved by Congress. Biden's basis for saying that the executive branch has the right to simply declare student loans forgiven is both egregious in its own right and troubling for the future of executive power plays.

There are pragmatic reasons to be wary. The whole claim here is that higher education has grown too expensive. But to simply write off existing student loan debt without addressing the source of the fast rise in college prices —which has a lot to do with the federal student loan program existing—is only ensuring ongoing problems.

There are economic reasons to be wary. Loan forgiveness may encourage reckless borrowing, if today's college students think they won't actually have to pay back their loans. And this, in turn, could lead to even higher college tuition rates. It could also be inflationary more generally, by freeing up income for tons of people who may then drive up demand for goods and, along with it, prices.

There are also moral reasons to be wary. The program amounts to a massive subsidy for middle-class Americans, as opposed to benefiting the most economically downtrodden or financially strapped. It provides a handout to many people for whom loan payments aren't a problem now (someone making $125,000 per year can surely afford a few hundred dollars per month) or won't be in the very near future (for instance, a doctor or lawyer on the verge of making big bucks who hasn't quite gotten there yet). In short, the program "consumes resources that could be better used helping those who did not, for whatever reason, have a chance to attend college," as economist Larry Summers put it on Twitter earlier this week.

One of the biggest reasons people seem to be opposed is that it offends people's basic sense of fairness. Certainly not everyone who had to take out student loans was lazy, irresponsible, or anything of the sort. And not everyone without student loan debt is responsible or hard-working; many just lucked into having parents who could afford to pay for college. But there are many people for whom avoiding student loan debt or paying it off promptly meant making all sorts of sacrifices. Biden's loan forgiveness program says to them that this thrift, practicality, etc. may have been for nought.

This last reason has taken the biggest beating from folks who approve of Biden's student loan plan and are taking aim at its critics. The uncharitable summary of it is that people who suffered in avoiding or paying off student loans just want others to suffer similarly. The implication in this line of criticism is that opponents of student loan forgiveness are just kind of assholes, twirling their mustaches and shouting, "pull yourselves up by your bootstraps!" at people drowning in debt.

Someone argued to me yesterday—citing Social Security benefits for comparison—that any new entitlement program will benefit some people while leaving out others who may have benefited had it been enacted sooner. For instance, someone in his 70s when Social Security started may have stopped working sooner had it been around a few years earlier. But I don't think this comparison holds up, since older workers excluded from a few extra years of retirement weren't put at a professional disadvantage relative to their peers. The same can't be said for student loan forgiveness.

And this gets at the crux of the fairness factor here, I think. It's not just that some people made certain sacrifices—like working more hours as a student or living with parents instead of in a dorm—that made the college experience less fun. Many of the things they gave up may put them at a long-term professional disadvantage relative to those who made different decisions regarding loans.

Choosing to go to a less prestigious school. Forgoing unpaid or low-paid internships and fellowships in favor of working jobs that pay better in the short-term but provide less long-term advantage. Working for pay instead of spending more time on personal projects or research related to one's field. Living in a cheaper city after graduation, or taking a more lucrative but less elite job right out of school. Decisions like these may have helped people avoid some student loan debt or pay off their debts more quickly while costing them other important things—the right lines on their early-career resumes, networking opportunities, professional contacts, etc. This could have a long-term effect on their professional opportunities and earnings. Meanwhile, they're competing for work with people who maybe did the right internships or went to a better school because of student loans.

It's not just that the latter group may have had more fun or made decisions deemed by some to be less "responsible" (which is arguable, considering the advantages these decisions may have conferred). It's that a lot of them may have a lifelong professional advantage over the former, and perhaps the fact that they incurred loan debt mitigated this somewhat—but not anymore. And never mind that these advantages may even make them better positioned to pay off their student loans.

None of this may change anyone's calculation about whether erasing student loan debt is ultimately good or bad policy. But maybe it will help people think twice before acting as if the tradeoffs in this calculation are all frivolous and anyone upset by them simply wants people to suffer.

FREE MINDS

How misinformation spreads. Social media takes a lot of blame for spreading misinformation, and traditional media outlets are some of the most likely to point fingers this way. But ample research suggests that much misinformation originates from traditional sources, like newspapers or political speeches. The latest in this corpus: a study on misinformation about spiders.

"Here, we studied the global spread of (mis-)information on spiders using a high-resolution global database of online newspaper articles on spider–human interactions, covering stories of spider–human encounters and biting events published from 2010–2020," write the authors in "The global spread of misinformation on spiders," published in Current Biology. "We found that 47% of articles contained errors and 43% were sensationalist."

Perhaps contrary to prevailing wisdom, bigger papers were more likely to be sensationalist. "The probability of an article being sensationalistic increased in international and national newspapers compared with regional ones," the authors point out.

Unsurprisingly, sensationalist stories were more likely to contain misinformation.

FREE MARKETS 

Airbnb regulation ruled unconstitutional. A federal appeals court has ruled a New Orleans regulation targeting short-term rentals (like those posted on Airbnb) is unconstitutional:

The 2019 ordinance was adopted by the New Orleans City Council in hopes of slowing the spread of "whole-home" vacation rentals, amid complaints that the rentals were driving up property costs and tax assessments, that full-time residents were leaving historic neighborhoods and that vacationers' all-night parties and noise were often pushing the limits of New Orleans' reputation for revelry.

A key provision of the law says that a person can get a short-term rental license only for their primary residence — a residence for which they claim a Louisiana homestead property tax exemption. The 5th U.S. Circuit Court of Appeals ruled Monday that the provision unconstitutionally restricts interstate commerce.

QUICK HITS

• The U.S. 5th Circuit Court of Appeals upheld a Mississippi law that denies voting rights to people who have been convicted of certain felony crimes. (Read the Mississippi Free Press on the racist roots of the law.)

• There is no national teacher shortage.

• Anti-bot campaigns come for pro-America accounts.

• California is set to ban the sale of new gasoline-powered cars, effective in 2035.

• "The Michigan Court of Appeal on Wednesday declined to take up an appeal from the Michigan House and Senate requesting a three-judge panel overturn a lower court preliminary injunction that's stopping the enforcement of the state's abortion ban," reports The Detroit News.