This galaxy take on student loans tries to convince us that loan forgiveness is “not actually costing anyone any money.” It received a disturbing amount of likes and shares, which means it’s being taken seriously, so here’s the breakdown.
▪️It begins by giving a hypothetical scenario where the lender is charging a 365% interest rate, which is well into loan shark territory. In this scenario, yes the lender could still profit despite forgiving some of the interest accrued, but student loans avg around 7% interest, entirely different.
▪️All money for Federal student loans originates from the US Treasury, which is then sent to the Dept of Education and then to students. Congress appropriates this money each year. It is funded through federal tax dollars (or borrowing) and absolutely costs money.
▪️When recipients repay their loan, this is sent back to the US Treasury (via a student loan servicer middleman). Ostensibly, this would repay the initial taxpayer money sent out, if everyone repaid their loans. If the loans are forgiven, the US Treasury takes the hit.
▪️Pretending it’s not costing money because interest accumulates is nonsensical. In the meme’s hypothetical scenario of 365% interest, yes. But at 7% interest, when the CPI is currently above 8%, the government (i.e. taxpayer) is already losing on the loans.
▪️And that’s if everyone was paying and there were zero costs associated with administering the loans. But people aren’t paying (there’s still a moratorium), there are always defaults, and there are administrative costs.
▪️Plus, not only is $10K per borrower being forgiven, Biden’s order also changes the income-based debt repayment program (IDR) to cap payments at 5% of discretionary income (income exceeding 225% of the poverty line).
▪️Thus, an individual making $75K/yr would only be responsible for $2,221/yr ($185/month) whether they borrowed $20K or $200K. And after 20 years (now sometimes only 10 years) the remaining loan balance is forgiven (i.e. absorbed by the US Treasury).
▪️The result is this will cost a lot of actual money. The Wharton School estimates ~$500B over 10 years, but the real impact could be the changes to the IDR, which could easily cost over $1T as new borrowers change their behavior (take on even more loans).
https://budgetmodel.wharton.upenn.edu/issues/2022/8/26/biden-student-loan-forgiveness
▪️This meme is correct on one aspect, your taxes aren’t paying for loan forgiveness, because the government isn’t adding new taxes to pay for it. It will simply add to the debt, which will be paid by future taxpayers and/or through inflation. But it will certainly cost someone actual money.
I first critiqued this terrible take by looking at how food has actually improved substantially. Even though I said the same could be done in every category, people said “you’re only doing food.” So let’s do air travel and see why it’s not gotten better, not worse.
▪️Aircraft have greatly improved. Just 15-20 years ago, many domestic routes (~15%) were flown by turboprops like the Brasilia, Dash 8 or Saab. Now, almost everything is in jets, and most aircraft have WiFi. Some even have Starlink, where you probably have faster WiFi than your home. Most major airlines offer dozens or hundreds of movies and shows to watch.
▪️Newer designs like the 787 have lower cabin altitudes and improved humidity, which make a huge difference in passenger comfort on long haul flights. The first/business class international market has gotten very competitive globally, with many carriers offering excellent service and amenities. Pods, suites, showers, etc. Coach still sucks but is dramatically cheaper ...
This is the complete opposite of an empirical fact. The right has now joined the left in being pessimistic about the modern world and completely unappreciative of the amazing abundance we now have. I’ll just focus on food here, but you could do it for almost every category.
▪️Fresh produce used to be available only in season. In the winter it was canned or frozen. People used to send fruit for Christmas gifts, it was that much of a luxury good. Now, you can get giant, sweet berries year around in every grocery store. Corn on the cob in February. Not to mention once rare items like dragon fruit, heirloom tomatoes or baby bok choy.
▪️If you didn’t live on the coast, seafood was either not available, frozen, or extremely expensive. If you lived in the Midwest and traveled to coastal locales you would quite literally be able to eat food you had never seen. Salmon has become much more abundant and accessible. You can get fresh ahi at Walmart today. Sushi and oyster bars exist everywhere ...
▪️This is a proposal that pertains only to graduate level nursing degrees, not undergraduate ones (which were never considered professional degrees). The proposal will have a 30-60 day public comment period next year, where groups can object, before the DoE will decide on it.
▪️This is about how much federal student loans someone can take out for a particular degree. The cap on graduate degrees is $100k ($20,500/yr), while a “professional degree” limit is $200k ($50k/yr).
▪️Under the new rule proposal, professional degrees include:
🔹Pharmacy
🔹Dentistry
🔹Veterinary medicine
🔹Chiropractic
🔹Law
🔹Medicine (including osteopathic medicine & podiatry)
🔹Optometry
🔹Theology
▪️The nursing degrees excluded are ones like master of science in nursing (MSN), doctor of nursing practice (DNP) and PhD in nursing. These degrees would be limited to $100k in federal student loans, like all other graduate degrees.
▪️These changes came from the One Big Beautiful Bill’s...
