Refinancing Outstanding Student Loans: Not As Progressive As It Seems
Uploaded by
Barmak NassirianRefinancing Outstanding Student Loans: Not As Progressive As It Seems
Uploaded by
Barmak NassirianI logged in as Barmak Nassirian and submitted the following comment in my name on the Brookings blog post by Matthew M.
Chingos and Beth Akers entitled Refinancing Outstanding Student Loans: Not as Progressive as it Seems. My comment was posted at around 11:30, and seemed to be up, but has since disappeared for reasons unknown.
The income distribution data for student loan borrowers are interesting and certainly add a layer of additional nuance to the policy debate. Having said that, the analysis is incomplete and doesn't quite make the strong case that the headline suggests. First, the authors don't address Sen. Warren's main point, which is that student loans, initially designed and generally perceived as financial aid, have morphed into a lucrative net-revenue generating activity for the federal government. That fact, primarily a function of the spread between the government's (unfairly) low cost of capital and the (unfairly) high borrower rate is what generates the massive budgetary "savings" whose paygo costs the "Buffet Rule" tax hike would offset. Any objective assessment of Sen. Warren's proposal should address her critique of the federal government's rate arbitrage policy and her substantive argument that funding costs and borrower rates should be more thoughtfully and more reasonably linked than they are under current law. Second, it is not clear as to what standard of progressivity the authors believe the Warren proposal fails. Even in view of the data they produce, they certainly can't argue that the Warren proposal is regressive, since the paygo offset for the foregone savings would still be derived from families with substantially higher incomes than the top income quartile. It would help to know exactly what pattern of distribution the authors view as adequately progressive. Indeed, the point-blank statement that refinancing would benefit "the affluent at the expense of the disadvantaged" is flat-out incorrect and unsupported by any of the facts presented. Finally, the rather meek argument regarding economic incentives being best used to change consumption behavior narrowly focuses on education without factoring in how unfairly high educational debt-service is now distorting consumer behavior in other sectors of the economy. I hope the authors will dig deeper and expand the scope of their analysis. Barmak Nassirian
