PILOTed

Is Biden’s Student Loan Forgiveness Good or Bad?

A person I trust and admire contacted me to ask about President Biden’s tuition forgiveness initiative that forgives $10,000 or $20,000 in student loans per person.

He initially made five points and then followed up with a sixth:

1. Why should a student that borrowed money to go to school get money when I paid cash for my son’s education? Wouldn’t it be fair to give us both the money?
2. Why should a worker that never went to college have their tax dollars go to either of the groups above?
3. Does not debt forgiveness foster moral hazard?
4. Isn’t this an expenditure of the Treasury and shouldn’t it be the province of the legislature to allocate these funds?
5. This is bad politics as it is a tax on blue collar workers (whom Democrats traditionally favored) that benefits white collar workers. It furthers the divide in the country that I fear.
6. How is Biden proposing to pay for this? That’s important. If it is Treasury borrowing then the poor are paying. I don’t see how high school educated people (working poor) benefit more than college educated students.

Since I developed and teach a course in Sensemaking and Mindshifting, I thought I’d take a stab.

 

The big picture

First, on a high level basis, I think most of us agree that having substantial portions of young adults in debt for trying to get educated in the ways that the education system, society, and most of their trusted advisors have indicated, is suboptimal. 

Our systems generally nudge students toward education after high school. Forty years ago, when high school graduates attended a state university, the family paid about 30% and the state paid about 70%. Now with costs significantly higher, the family is expected to pay about 75% and the state somewhat over 20%. And this doesn’t even account for graduate studies which are necessary for many professions.

The problem we should be trying to solve, instead of just the student debt piece, is how do we prepare each new generation for adulthood. That discussion, though, is not even on the table in Washington, or in state governments, or in districts, or even in schools.

What we are left with is, do we do or do we don’t reduce student debt for about 20 million people?

Why should a student that borrowed money to go to school get money when I paid cash for my son’s education? Wouldn’t it be fair to give us both the money?

What would be fairer is if we had a reasonable way, at least going forward, so that young people could be prepared for adulthood, work, and life without going into debt, and if that included all children, yours included.

I’m glad that neither you nor your son owe money for his education. But no, the question is not should everyone with kids get $10,000 or $20,000, it’s will the reduction of student loans be a net benefit or a net hindrance for the economy. I’m inclined to think it is a net benefit.

Why should a worker that never went to college have their tax dollars go to either of the groups above?

Over 70% of income tax dollars are paid by the top 10%. The bottom 50% of taxpayers in aggregate paid about 3%. So this is not a tax on workers who never went to college.

Does not debt forgiveness foster moral hazard? 

There are a lot of moral hazards. Larry Summers earns a bunch of income from the groups who have and are making money from student debts, and he is against forgiveness. I don’t think Larry Summers is making his decisions based on that, although it would be better if everyone were like the expectations made of poor Pompeia, Caesar’s wife must be above all suspicion.

Most of the people with student debt were following the broad principles of our society, that they pursue a college degree and it would be a ticket to a better life. For many, they didn’t even receive the degree or certificate, and for many others it turned out not to be such a winning ticket.

I personally believe that many of those making this point actually have their own moral hazards.

Isn’t this an expenditure of the Treasury and shouldn’t it be the province of the legislature to allocate these funds?

We’ve all learned that the legal system and courts are political. The eventual court decision on this will be political as well. The court will eventually give some logical and precedential basis for their decision, but it will be based on their assessment of how it benefits Biden, Democrats, the wealthy, and Republicans rather than strictly a reading of statute.

We will find out more later.

This is bad politics as it is a tax on blue collar workers (whom Democrats traditionally favored) that benefits white collar workers. It furthers the divide in the country that I fear.

Blue collar workers pay about 3% of income taxes. I don’t see how this is a tax on them.

How is Biden proposing to pay for this? That’s important. If it is Treasury borrowing then the poor are paying. I don’t see how high school educated people (working poor) benefit more than college educated students.

There are many who say that the last few bills pushed the US into inflation. On the other hand, the whole world seems to be experiencing inflation, and many countries did not have those initiatives.

I’ve seen the cost of tuition forgiveness as $300 billion. Even if that is all paid back in one year, that’s only a half percent of the economy. If this became US debt to be paid back over five years, it’s 3% of income tax receipts each year.

This does not benefit high school educated people who do not owe student debt. This proposal is not even forward looking, so it doesn’t benefit them in future years, and it doesn’t benefit their children. Wouldn’t it have been great if we could have structured something that benefited them and their children? 

Wh didn’t, but for people in the bottom 50% in the US, based on a 3% increase in taxes, the annual cost is about $20. Those are not the people who would be paying.

If this turns out to be inflationary, as Larry Summers predicts, then traditionally, the losers during inflation are retirees on largely fixed nominal incomes, bond holders (whose financial income is largely fixed), those whose compensation is relatively fixed in nominal terms, and employees who do not see wage increases to match inflation.

If labor continues to be tight, we can hope that workers will be able to see their wages increase. There is definitely uncertainty about a) the extent that this policy is inflationary, and b) whether wages will be able to keep up.

Is student debt forgiveness a good policy?

In my opinion, it’s not a great one. A great one would have looked at the whole issue of society’s role in preparing generations for adulthood.

It’s fulfilling a campaign promise, so it does show some integrity which has been lacking in politics. It’s questionable whether it will hurt the economy or significantly harm people in need. It is likely to benefit about 20 million people.

Uh oh, I think we have a problem

People ask me, “What is the benefit of learning how the mind makes decisions?” 

Persistence, self-initiative, critical thinking, creative thinking and innovation, collaboration, communication, and their opposites all begin in the mind. When you learn to recognize how the mind operates in each of these spheres, and learn how to move minds into resourceful mindframes, you will accomplish more and you will recover faster from conflicts, unanticipated obstacles, and detrimental emotional responses.

Here is an education example from real life.

A district was evaluating digital textbooks for science, and they asked for teacher volunteers to review a few offerings from respected publishers and make a recommendation. Each textbook was already in use at hundreds, or even thousands, of districts.

The teachers pull together and after a few weeks of reviewing the materials and sharing insights, they are close to selecting textbook A.

Just at that time, the district’s curriculum director realized that the district had received a grant for teaching science, and that the grant included purchasing textbook B. He cannot in good conscience pay for a different textbook when the district would be receiving copies for all students, support materials, and even PD for this one at no charge.

He informs the teachers, takes responsibility for the mistake, and says he is sorry.

The teachers are angry. They aren’t buying the apology.

Here is how a mindshifting practitioner would look at the situation.

At this moment the teachers are angry. Anger emanates from the more primitive areas of the brain, the limbic system. When the limbic system activates anger, it also secretes the stress hormones adrenaline and cortisone which focus the brain on reactions to the threat that is causing the anger, shuts off the innovative and critical thinking parts of the brain (which tend to exist in some of the more recent areas to develop, the prefrontal cortex) and direct those areas to generate reasons or stories the justify the anger.

These stories are phrases like:

• The district doesn’t respect teachers
• The district took advantage of me
• I’m going to show them that this textbook isn’t going to work
• They never listen to us
• That’s the last time I put in extra time or effort for them
• It’s always just about the money, they don’t really care about the children at all, only we teachers care about the kids and look where that gets us

While the teachers are angry, and while their critical thinking, creative, and resourceful parts of their brains are shut down, the teachers will not be receptive to anything that administration says or does to justify the decision or to move on; in fact those efforts are likely just to reinforce the negative stories that their brains are feeding them.

What can’t people just move on?

Before the teachers can move on, their limbic anger has to dissipate, and their limbic brain must reset.

There are three ways to reset the limbic brain and give access to calmness, resourcefulnes, or playfulness.

1. A person can be aware of when their limbic brain is controlling their reaction. Sometimes just realizing that you are angry (or afraid, or anxious, etc.) is enough to reset.
2. Mindfulness, or focusing on sensations such as breathing, sounds, the environment, meditation, trees, or the bodily sensations of the emotion may open up enough space to reset,
3. Positive internal chatter, talking to yourself in positive terms such as, “maybe this is really for the best,” “what does this now open up for me to best live my life,” “of course I am disappointed but I wonder how I can make the best of this now.” Note that this is internal chatter, no one wants to hear this from someone else, it has to be internally generated.

Along with the three ways of resetting the limbic brain, there are only two ways of getting over a past disappointment or negative outcome.

1. You can decide that this outcome was not really that important, choose to dismiss any slights or anger, and move on. In fact, over time, this often happens. In ten years (probably less), virtually all of the teachers will likely have moved on from this event; we all do.
2. You can find a gift or opportunity in this outcome. For example, the district will now have hundreds of thousands of dollars that they can spend on other things, can those actually be more beneficial than using textbook A? Or, in the process of reviewing the textbooks, the teachers were exposed to many different tools and teaching techniques, can any of them be incorporated into teaching along with textbook B?

When teachers are trained in mindshifting

they learn the skills to reset their own limbic systems and to move past disappointments. This significantly reduces the chances situations like this turn into crises. Imagine listening in to the internal thoughts of a mindshifting teacher:

• What? All that work for nothing?
• Wait, that’s my lizard brain working up to anger.
• Let me take a few minutes to calm myself.
• Okay, in the grand scheme of things, this really isn’t so terrible, what can we salvage from this?

These teachers were not.

If the administration had been schooled in MIndfulness

They would have recognized that the teachers would regard this as an empty apology; all form but no substance, or what behavioral psychologists might call a “denial” apology: “I’m sorry but it wasn’t my fault.” They would have either formulated their initial communications to the teachers in a form that would connect better with how the teachers would likely feel and react, or, if they overlooked that step, they would have quickly realized the situation and reacted in a way to restore the teachers’ sense of connection and value.

These administrators were not.

So either the teachers remain in anger mode until their anger dissipates over time, or the administration needs to use some mindshifting techniques to coach the teachers.

Here are two mindshifting techniques that could be used in coaching

Someone can coach the teachers. A good coach could connect with the teachers and help them move forward, perhaps with mindshifting techniques such as motivational interviewing.For example, one possible coaching technique would be starting a discussion of other times each of us has been angry, and times when when we were able to move out of anger and into calm and action. The process of recalling and recounting those instances would be a way to trigger a form mindfulness, and provide space, and then recalling instances when they diminished the anger on their own might give them access to their own resourcefulness.

The administration could provide a “gift or opportunity” to the teachers. For example, they could talk about their error, and that since the district has this extra money and since the teachers have been so helpful, they would like to give the teachers the opportunity to determine how some of that money would be spent for the students.

It’s not that these different possible solutions couldn’t be arrived without Mindshifting, but

1. With Mindshifting, if one understands the dynamics of how the brain is operating and the mechanisms for controlling the mind’s operation, the problem is framed in a way that naturally leads to possible interventions such as these.
2. If the teachers and administration were already skilled in Mindshifting, the recovery from issues such as this would be much quicker and likely autonomous.

Want to learn these techniques for yourself or your students?

The next class, Mindshifting 1: Growth Mindset and Critical Thinking for Educators will start on October 18 and run for 8 sessions. More info and register here.