Income-driven repayment as de facto forgiveness
In the 2021 episode, Preston Cooper argues that a large share of federal student loan debt is already destined for cancellation through income-driven repayment, which ties loan payments to a share of a borrower’s income and forgives remaining debt after 20 years The Truth About the Student Loan Crisis (2021). He says the Education Department projected roughly $435 billion in losses on the program, about one-quarter of all outstanding federal student loans, and concludes that “we don’t necessarily need student loan forgiveness because a bunch of it is going to get forgiven anyways because of the way the system’s set up right now.”
Cooper says the borrowers using income-driven repayment most heavily are those with graduate degrees, law degrees and MBAs, who pay a small share of income for 20 years and then receive forgiveness on the rest. Because graduate students can borrow unlimited amounts from the federal government, he says the marginal dollar borrowed is effectively free, and borrowers run up debts of $100,000 or $200,000 knowing most will be forgiven.
Who holds the debt
Cooper distinguishes between two populations of borrowers. About half of people who default owe less than $10,000, which he says is not enough to obtain a college degree; these are people who attended for one or two semesters and dropped out. He estimates the government loses 20 to 25 cents on the dollar when borrowers default. He says these borrowers still signed on the dotted line and should be somewhat accountable, but that the federal government can garnish wages, take up to 15% of a paycheck, seize Social Security benefits and tax refunds, and add thousands of dollars in fees without transparent notice. He says 27% of student borrowers will default at some point.
By contrast, Cooper says the politicians proposing forgiveness in Washington have a skewed view of student debt because the people they know with debt are law school graduates with $100,000 balances and high salaries. He says he would be okay with reallocating help currently given to law and medical students toward people who attended for a couple of semesters and dropped out, whom he says were “kind of tricked by the federal government and colleges into taking on more debt than they were able to.”
Evaluating forgiveness proposals
Cooper describes Biden’s proposal as across-the-board forgiveness of $10,000 per borrower, which he calculates would cost about $370 billion, and says Senators Schumer and Warren argue that does not go far enough and propose $50,000 per borrower, at a cost of about $1 trillion The Truth About the Student Loan Crisis (2021). He says the problem with both is that the federal government will make more than a trillion dollars in new loans over the next decade, so canceling debt today without changing how loans are made merely kicks the can down the road.
Bob Zadek raises the case of a borrower who attended for a semester and a half, ran up $15,000 in debt, left, and paid it off at great sacrifice in the 18 months before forgiveness was granted. He says that person would have been $10,000 better off had he not paid, and asks whether money would have to be returned to anyone who repaid in the past 18 months or two years. He calls the moral lesson “don’t pay your debts.”
Cooper agrees the proposals create the wrong incentives. He notes the federal government suspended student loan payments for 18 months because of the pandemic, with payments due to resume in October, and says borrowers who think $50,000 of forgiveness might be coming are much less likely to start repaying. He says the mere discussion of forgiveness creates a perception that loans will be forgiven, discouraging repayment and encouraging more borrowing in the future. He compares the dynamic to the mortgage crisis, when the federal government said it would bail out banks and mortgage companies, and says he sees history repeating itself.
Institutional accountability and alternatives
Cooper describes his own proposal as a student loan relief plan that does not center on forgiveness. It would ensure borrowers in distress, particularly those with less than $10,000 in debt, have access to a safety net program like income-driven repayment so they do not slip back into default. The centerpiece is accountability for colleges participating in the student loan program, which he says get off scot-free while students take on tens of thousands in debt, often drop out, and taxpayers absorb the losses. He proposes paying for relief with a new penalty on bad colleges, including those he calls dropout factories.
Zadek asks why the federal government should be in the student loan business at all, and why colleges should not make the loans and bear the credit risk, as auto sellers do when they finance a sale. Cooper says his plan was calibrated to low expectations for Congress but that in the longer term Zadek’s approach is exactly right, because it aligns incentives: a college would not get paid unless the student repaid, and the student would not repay unless the education led to a job paying enough to cover the loan. He cites Purdue University under Mitch Daniels, where students could take financing from the university itself and repay in proportion to earnings over eight or ten years, and coding bootcamps that finance training and are paid in proportion to what students earn.
Executive action and legal basis
The 2022 episode features Elizabeth Nolan Brown discussing President Biden’s executive action to forgive student loan debt and examining its legal basis under the 2003 HEROES Act The Student Loan Debt Fiasco (2022). The excerpt describes the discussion as covering the action’s questionable legal basis, its economic consequences including potential inflation and tuition hikes, and the moral and political implications of what the episode characterizes as a middle-class bailout. The excerpt does not record the arguments Brown made on any of these points.
Across episodes: no development shown
The two episodes touch the same topic a year apart, but the excerpts do not show the later treatment engaging the earlier one: the 2021 episode works through income-driven repayment, default data, the cost of the Biden and Schumer–Warren proposals, moral hazard and institutional accountability with Preston Cooper, while the 2022 excerpt with Elizabeth Nolan Brown is a summary of a discussion of executive action and the HEROES Act whose substance is not recorded. The excerpts show no development between the earlier and later treatment.
What the sources do not cover
The excerpts do not state what the HEROES Act provides, what legal arguments were made for or against the executive action, or what any court held. They do not give the outcome of the forgiveness proposals, the final cost of any program, or the terms of the payment suspension beyond the resumption date mentioned. They also do not state the name of any bill, the title or field of either guest beyond what the labels show, or the founding date or principle of any program discussed.