This Week In the Mayonnaise Clinic: Will Biden Cancel My Student Loans?
Probably not. Plus: The most strategic age for a Supreme Court justice
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Now, on to the questions and answers.
How likely do you think it is that we see any permanent relief or reform (congressional or otherwise) for federal student debtors in the next five years? Because I graduated from college between 2006 and 2013, a lot of my federal debt (more than $25,000) is financed at a miserable 6.8% interest rate. I could cut that rate in half by refinancing privately right now, but doing so would mean giving up on federal borrower protections and the ongoing repayment freeze. Because the Fed will hike rates before the current repayment freeze ends, we’re in a “decision point” for this question — the best interest rates available this cycle are probably available right now.
My short answer is I think the extent of student debt relief that’s likely in the coming years is between $0 and $10,000 per borrower, and probably much closer to $0 than $10,000. President Biden seems reluctant to seek legally questionable relief through executive action, and legislative relief didn’t even make it into the more ambitious versions of the Build Back Better legislative package, which won’t pass in anything close to its current form anyway. And Democrats are probably going to lose at least one house of Congress in the elections later this year.
The policy rationale for student debt relief, such as it was, has also gotten weaker since the 2020 campaign: Helicopter drops of money into the economy are now harmful rather than beneficial (inflation), and the Democratic legislative majority (narrow as it is) has found more progressive ways to get money out the door than by handing windfalls to people who have attended college.
That said, I have no idea how much longer the repayment freeze might be extended. My guess it not that much longer — the last justification for extending it was based on the Omicron surge, which is now on the way out — but who knows? Resuming student loan payments right before the midterms seems like a pain point the administration might want to avoid.
Despite my unsatisfactory answer (sorry, RM), allow me to address a related issue: The systems we use to finance and subsidize higher education are ridiculously opaque. They often rely on complex and contingent formulas (like the ones governing public service loan forgiveness) that make it hard for students to even figure out what an education is actually going to cost them.
This stuff is way too complicated. If students don’t know how big a subsidy you’re giving them — and whether they’ll actually be able to jump through all the hoops to qualify for it — then the subsidy isn’t as effective as it should be at encouraging people to get an education.
Ad hoc debt relief — the type many progressives advocate — would be even less useful than this: When you give an unexpected subsidy for something someone has already done (surprise!) that doesn’t cause other people to do more of it.
The push for student debt cancellation, the 529 plan approach of structuring tuition subsidies as a tax cut,and the urge to structure new subsidies as complex debt forgiveness programs — these ideas have very different constituencies of fans, but they all rely on a common fallacy: That if you provide a subsidy in a form other than a direct outlay, its cost isn’t real because it’s hard to measure. In reality, tax breaks and debt cancellation impose the same kinds of costs on taxpayers as direct subsidies.
If we’re going to spend additional dollars on education subsidies, they should go toward people who attend college now or will attend in the future, so the subsidies can actually encourage more people to attend school. They should be targeted at people for whom the subsidy makes the difference between getting an education and not. And the payments should be structured in a clear, upfront manner that ensures people actually know they’re getting a discount and how big it is. Debt relief is a mistake because it doesn’t achieve any of these goals.
Arjune Bose thinks it’s time for some game theory:
It seems like the Republicans have been more aggressive about pulling the levers of government so their strategies are closer to the "game theoretic optimum," assuming polarization is just one party versus the other. Over time, I think the Democrats are adopting similar strategies, albeit slowly. In terms of nominating a Supreme Court justice, what precludes the Biden administration from nominating a smart but young liberal to the court? Is there anything really standing in the way of a pedigreed 27-year-old who presided over Harvard/Yale/Stanford Law Review and clerked at the Supreme Court?
I think there are a few reasons this doesn’t happen.
First, so long as Democrats expect to hold both the presidency and the Senate at least once every 12 years or so, then at some point the benefit of an ever-younger nominee diminishes. You just need to nominate someone young enough to sit on the court through two cycles of partisan control and then retire at an age that is comfortably earlier than their death. You shouldn’t nominate someone who’s 60 (as Ruth Bader Ginsburg was when Bill Clinton put her on the court) but 45 or so is young enough for this approach to work.
In addition to the criticism you’d receive from conservatives about your theoretical 27-year-old being unqualified, I think liberals would reasonably worry about how fixed this young person’s worldview is. It’s not exactly rare for someone to come out of law school with one ideological viewpoint and shift toward a different one as he or she approaches middle age. This concern is heightened by the prospect of entryism: If ambitious law students learn all you need to do to get on the Supreme Court is get excellent grades and perform the right ideology in law school and for a couple of years after, then you’re likely to get candidates doing this strategically while concealing their true viewpoints.
Basically, there’s too much risk you’d get Soutered, and it’s not necessary anyway.
Michael wants travel advice:
My wife, our daughter and I are planning a trip to Hawaii for a week in 2023. My daughter will be two-and-a-half at the time of the trip. This is our first time to Hawaii. We’re experienced international travelers, but this will be the first vacation we’ve taken in awhile — and our first “big” vacation/trip with our daughter. What advice do you have on traveling to Hawaii? Where do you go for travel insight and resources?
I love Hawaii and have been there six times, visiting five of the islands (Kaua’i, O’ahu, Lana’i, Maui, and Hawai’i.)
I have some specific advice about travel right now: Because of how COVID has changed people’s travel styles, city destinations are currently cheap, while resort destinations are expensive. Vacationing in Hawaii is especially expensive right now in part because it’s a tropical destination that does not involve crossing international borders and all the COVID-driven complications that creates.So if you have a list of travel objectives for the next decade or two that includes both cities and tropical islands, my suggestion is to do the cities now and save destinations like Hawaii for later, when prices have normalized.
That said, Hawaii is magical, and despite my own advice I am actually heading there later this month to celebrate a friend’s birthday. Michael has broader travel plans that involve heading onward to Australia, so I won’t seek to dissuade him from visiting in 2023, either. If you’re traveling at this time of high prices, one of my main cost-saving tips is to try to find a way to book your hotel on points, but at the best properties in Hawaii this generally requires booking far in advance.
Andrew Doughty’s island-specific Hawaii guidebooks (the “Hawaii Revealed” series) are excellent. Like Rick Steves does with Europe, Andrew offers opinions that actually help you figure out what to do rather than simply offering an endless menu of beaches and restaurants you could visit. I suggest you buy the book for whichever island(s) you head to.
With just a week, I would stick to one island. My favorite is Maui — like all the larger islands, it offers a beautiful variety of climates that vary as you travel around the island, with a windward side that is lush and green with high rainfall, and a leeward side that is dry with persistently perfect beach weather. I think it offers the best balance of beach, resort, scenery and adventure, in a size where you can do a scenic drive around most of the island in one day.
The other option I’d consider is Hawai’i (“The Big Island”). This is the only island with active volcanoes — including Kilauea, which has been erupting continuously since 1983 — and I’d say it’s more fascinating than Maui. Zach and I were fortunate on our honeymoon to visit at a time when Kilauea’s lava flow was pouring spectacularly into the ocean like a fire hose, at a location we could visit by biking to a viewpoint about a quarter-mile away. But Maui is prettier and easier to manage with much shorter driving distances, and I’ve also found Maui has better dining.
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Of course, another problem with higher education is that it’s hard for students to figure out what a degree is worth, but that’s a harder problem to fix than the degree’s price being non-obvious.
There is an additional problem with the 529 education savings account program: Because the benefits of tax-advantaged savings accounts primarily go to high-earning households, the program is not only regressive, it also does little to cause people to get more education because it overwhelmingly benefits students who would attend college with or without subsidy. Of course, God help you if you try to take a subsidy away from these people.
Average hotel room rates on Maui in September were $488 per night, up from 54% from the same month in 2019. Even pre-pandemic, Hawaii was expensive as resort destinations go, in part because incomes and wages on the islands are high compared to other tropical destinations.
You can find pages and pages and pages of posts on the Flyertalk boards about strategies to redeem Hyatt points at my favorite Maui property, the Andaz. The long and the short of it is that reward bookings are generally only available for stays of precisely three days, which you could combine into a stay of six days or nine, but not seven. If your daughter were older, Michael, I’d suggest a resort with a more robust kids’ club program (like the Grand Wailea) but the zero-entry beachfront pool at the Andaz should be great with a toddler.
Some of my favorite places to eat on Maui are Ka’ana Kitchen at the Andaz, Koiso Sushi in Kihei (book well in advance), Merriman’s Kapalua, and Monkeypod Kitchen in Wailea.
Just wanted to suggest to the person traveling to Hawaii with a toddler that you look into renting a condo in addition to hotel options. You don't get the fancy pools (but your kiddo is young to enjoy those) or the kids club so if you want those, then stick with a hotel, but it's nice to be able to eat a lot of your meals at home both in terms of saving some money and working around the child's attention span. If you select Maui as Josh suggested, I would look at Wailea if you can afford it, Kihei if you want more affordable but close to Wailea, or Kapalua if you want something in between and a little less crowded. The Kapalua Bay Villas are nice and right on the water with great views and nice pools and beautiful grounds.
I understand the hesitation surrounding student loan forgiveness, especially because as mentioned here, that cost eventually gets handed to taxpayers (nor does it solve the bigger problems of inflated costs of education in future years, and the circumstances surrounding individual borrowing at for-profit schools). However, it seems to me that relaxing the terms around repayment (expanding income- and public service-based repayment), unburdening interest rates accrued on loan principal, and also providing some sort of tax relief for the payee would be avenues for helping get borrowers better relief. Bankruptcy law might also deserve a look. Student loans are meant to be an investment in pulling more Americans into the higher education system, which should benefit both the individual and the American economy more generally. So-- trying to think of ways to lessen student loan burdens on the whole, maybe tax-incentivized repayment features, caps on interest generation, and loosening of some repayment terms would go further than blanket-level loan forgiveness.
Full disclosure-- I hold a significant amount of student loans from public university- it took me a long time to support myself through the end of my graduate degree. As much as I'd personally love student loan forgiveness, I think more practically that there could improvement to a number of repayment features.