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Jul 28, 2019 19:27

Limitations define Kamala Harris’ student debt plan

Yesterday, Kamala Harris’ Twitter account sent this out: 

“Yesterday I announced that, as president, I’ll establish a student loan debt forgiveness program for Pell Grant recipients who start a business that operates for three years in disadvantaged communities.”

Understandably, this tweet made a lot of people angry. It’s a distillation of a common flaw in liberal policy: a self-defeating tendency to include an endless string of qualifiers meant to make the policy seem “smart” and “targeted”, which complicates the proposal’s messaging and make any implementation incredibly ambiguous.

For example, here is a list of qualifications someone who need to achieve to receive this debt forgiveness: 

1. Take out pell grants in college. 

2. Start a business in a “disadvantaged community”.

3. Have that business survive for three years. 

If you meet all three of these qualifiers, the potential Harris administration will forgive your Pell grants up to $20,000. Harris’s campaign is positioning the plan as a targeted way to help African American communities and lower the debt Black Americans occur through education. Except, by including so many qualifications, Harris is massively limiting the number of people her debt forgiveness plan would help and introducing a whole mess of questions. Including: 

1. How do you define a “marginalized community”? (Will this be up to the states? How do you make sure this definition is not discriminatory or uselessly limited?)

2. Only 32% of American undergraduate students receive Pell Grants, and many supplement it with other forms of loans. Harris’ plan vaguely offers a loan deferral during a “business-formation period”, but includes no other form of support for people who supplement their Pell Grants with other loans or lack Pell Grant debt entirely. What do those people do?

3. Only around 60% of small businesses survive three years of existence. What happens to the failed businesses? 

4. Theoretically, this plan exists to increase investment in marginalized communities. However, what’s stopping businesses from taking advantage of this plan in communities that are in the midst of gentrification? How do you keep the plan from inadvertently incentivizing gentrification? In other words, could the owner of a fancy coffee shop in a gentrifying urban neighborhood receive this forgiveness for their Pell Grants? Who does that help? 

To be fair to Harris, this policy proposal is just part of a larger, much more impressive plan to close the opportunity gap through investments in HBCUs and incentives for African-American-owned businesses. Harris has been a continuous champion of leveling the playing field between Black and White Americans, a crusade she deserves praise for. 

However, if you are looking for Kamala Harris' plan for direct student loan forgiveness, this is it. And therein lies a problem. 

According to Harris’ issue page for student debt, her biggest proposal to address ballooning student debt is allowing refinancing for high-interest loans and an expansion of Income-Based Repayment programs (essentially a cap on monthly payments determined by income). Compared to the plans of many of her rivals, this platform is much less generous to current debt holders. 

While IBR expansion theoretically would forgive a large amount of student debt, this only happens after a debt holder pays 20-25 years of monthly payments (based on current IBR terms—Harris may shorten the length). Student debt is a crushing burden for many young Americans, a chain around a generation’s neck that limits mobility and possibility (a crisis which, to be clear, is worse for Black Americans). It’s hard to see how 20 to 25 years of monthly payments, even if they are capped at 10 to 20 percent of monthly income and/or refinanced, would inspire or bring much relief to an increasingly desperate group of debt holders. 

Even more confusingly, Harris supports making community college tuition-free and public college debt-free. This is good, unquestionably, but without offering loan forgiveness to the millions of Americans deep in debt from public college, it feels restrained. She is acknowledging that the cost of public college is a problem, but is not offering the same solutions to those already victimized by it as she is for future potential victims. 

If this all sounds familiar, it’s because most of Harris’ student debt proposals come from mainstream Democrat thinking. Obama led an expansion of IBR back in 2009 and attempted to make two years of community college free in 2015. In fact, Hillary Clinton’s plan for student debt in 2016 is almost idea for idea what Harris is now proposing, albeit occasionally with less generous terms: a refinancing option based on current borrowing rates, a plan to make public college free for students from families making a certain income (Harris’s includes no distinction for income), and free community college. 

Yet in some aspects, Clinton’s proposals were even bolder than what Harris is now offering. Unlike Harris, Clinton supported a three-month moratorium on student loan payments from federal borrowers to give people time to consolidate and refinance. Her issue’s page talks about a program to revitalize the credit for delinquent borrowers. And, perhaps most strikingly, Clinton’s version of debt forgiveness for business owners in marginalized communities goes further: $17,500 in forgiveness for any loans upon starting the business. Harris’s version of this plan offers $25,000 more in debt forgiveness, but under more difficult terms and only towards Pell Grants.

This primary season is increasingly being defined by the sweeping proposals of progressive candidates and the milqouse opposition from their more moderate opponents. On one hand, you have Warren and Sander’s radical (yet fiscally and morally justifiable) plan to cancel the majority of student debt. On the other hand, there’s Amy Klobachar’s bizarre fascination with supposed “real talk;” lines like “if a billionaire can refinance his yacht, students should be able to refinance student loans” and plans that completely fail to acknowledge the generation-defining crisis that student debt poses. 

Harris seems to be trying to have it both ways. By empathizing with the issue of student debt, she is projecting an awareness of the deep suffering and anxiety that many Americans now live with because of a cruel system of exploitation. Yet in her policy proposals, she is siding firmly with the status quo: most loan debt will be paid off by those who took them out. Her proposals are predominately aimed at making this reality more slightly more bearable.