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Show Notes
Welcome to Michelle is Money Hungry, a podcast that has real and empathetic conversations that often focus on the intersection of policy and the financial conversations we’re afraid to have. I’m your host, Michelle Jackson and this summer I’m having conversations all about the potential for student loan forgiveness and what will happen if we move forward with the policy and what happens if we don’t
Kevin-My name is Kevin L. Matthews
Michelle-What is it exactly that you do in the online content creation space? I make investing simple. The week we’re recording this episode crypto is imploding and there are all of these financial headwinds happening. What are the economics of why this policy should or should not move forward?
Kevin-My first degree is in economics and I’m one of the few people who gets to say that I used my degree every day. The negative case is that you may create a “moral hazard” The other part of the argument is that it’s expensive to do around $1.7 trillion and the potential for further inflation (currently at its highest rate in 30-40 years) On the other side is that it was a campaign promise, a lot of people had to push back their version of the American dream. Some studies have shown that SLF is a way to eliminate the racial wealth gap.
Michelle-In my observations it seems like there are several generations of Americans who were told to go get educated. Then we asked-how do we pay? Undergrad, it’s capped. But, the advice has had a negative impact especially on black women.
Kevin-What I don’t think enough people talk about is that pay more for loans and don’t get paid as much. This allows an entire group of people to acquire assets. We’ve seen how many people, especially African-Americans because they weren’t paying on student loans. My wife and I bought a home because we weren’t paying on our student loans for the past 2 years.
Michelle-You’re right that this was a campaign promise. What are your thoughts about a $10,000 loan blanket forgiveness? Will that help people? The average is $30k so giving ⅓ does go a long way for some. Quick clarification-this policy isn’t just going to help Black women. If you were designing this policy or advising the administration-what would you advise them to do and the timing.
Kevin-If you’re me, then I would look at a measure of forgiveness and cost measures and protections. Kids who are in college right now will still have to pay. Forgiven an amount and figure out how to create a cap on tuition. I would also make trade schools affordable so that people can also have that choice. I would do that as soon as possible because of mid-term elections.
Michelle-One of the things I think about is that for the past 2 years people have had their loans paused. Now we have 30 year high inflation, we’ve got landlords gone wild, I’m curious about the real toll it’s taking on people is that there is no end date with all of these other financial headwinds coming at them. In the event that the Administration decides not to move forward with it-what are the options that they should consider.
Kevin-The good thing is that the job market is still such that you can aggressively increase your income while we still can. Employers are used to paying more and being more flexible. How can I earn more and offset work expenses such as working remote to offset the cost of transportation.
Michelle-I find that there’s a lot of classism and racism that frame how people react to the possibility of this policy being passed. What do you think about “hey, I paid my loans!”
Kevin-This may be more of a rant than an answer. Your minimum wage job paid for college but the cost of college has risen. If you’re not for SLF then you’re for paying higher wages. I’m going to try to make things better for other people. Realize that you have also benefited because you were able to buy a home before prices took off, you were able to invest your money, etc. We have this strange assumption that people haven’t been paying. There are people who took out $30k, paid $50k-they’re not getting a refund. We never talk about those who paid on student loans but didn’t receive a degree.
Michelle-Ok, I felt that. Where are some of the problems happening with lending. Many of my guests have pointed out that graduate loans don’t have a cap on borrowing and that a lot of predatory lending is at for-profit schools which are heavily partnered with the department of education. How would you advise them to clean up the programs on the lending side?
Kevin-I want to rant about the other part of your earlier question. I think we’ve fallen into a place where debt is equated with morality. And paying off debt is a virtuous thing. You didn’t become a great person because of “the work”
Kevin-I saw a tweet from a guy who was like if they give student loan forgiveness I will refuse it. For their $65 in loans.
Michelle-If you’re the Department of Education what’s the process you would use to keep this from happening again?
Kevin-I would try to fund education at the state level as much as possible. The school will pass the cost burden onto the students when it’s not funded correctly. Allow the market to open in that I would for programs to share more information related to earnings and employment.
Michelle-We spent 17+ billion dollars bailing out the automotive industries and then we bailed out the banks. Why are people angry about this policy? Is it back to virtue signalling.
Kevin-There are things that my tax dollars go to that I don’t agree with. People who pay student loans also pay taxes.
Michelle-I get frustrated because as a single person I get penalized with a lot of policy. I look at our budget this explains why there are homeless people in every single city that I’ve visited in the US. The removal of this financial burden would be so helpful.
Kevin-With the exception of inflation, a lot of people were able to invest, save and create businesses because of the student loan pause. That’s a win FOR YOU. I have a guy who comes and works on my yard and I can afford that because I’m not paying for my loans.
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