Government
Revisiting Federal Student Loan Forgiveness: An Update Based on the White House Plan
On August 24, 2022, the White House released a plan to cancel federal student loans for most borrowers. In April, we wrote about the costs and who most…
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On August 24, 2022, the White House released a plan to cancel federal student loans for most borrowers. In April, we wrote about the costs and who most benefits from a few hypothetical loan forgiveness proposals using our Consumer Credit Panel, based on Equifax credit report data. In this post, we update our framework to consider the White House plan now that parameters are known, with estimates for the total amount of forgiven loans and the distribution of who holds federal student loans before and after the proposed debt jubilee.
We estimate that the plan will cancel roughly $441 billion in federal student loans which would eliminate federally-held balances for 40.5 percent of federal borrowers, forgiving 31.1 percent of the total outstanding federal student loan balance. In our estimation, 5.1 percent of borrowers will be ineligible for forgiveness due to the income threshold. Distributionally, we find that the plan, particularly because of the additional forgiveness for Pell grant recipients, pushes more forgiveness dollars toward borrowers living in lower- and middle-income neighborhoods than borrowers living in higher-income communities. By our count, 65 percent of federal student loans are held by borrowers living in neighborhoods with median household income below $83,000, and borrowers in these neighborhoods receive 72 percent of proposed loan forgiveness. Student loan borrowers residing in lower- and middle-income neighborhoods are more likely to have delinquent or defaulted balances and are more likely to have their loans completely forgiven by the plan. Overall, we find that the White House plan directs modestly higher average forgiveness amounts to lower- and middle-income areas. Because these borrowers have higher delinquency rates and balances that are larger relative to their incomes, forgiveness will have a more substantial impact on lower-income student loan borrowers.
Data and Methods
For this analysis, we use data from the New York Fed Consumer Credit Panel, which is a 5 percent anonymized sample of credit reports from Equifax. We directly observe loan balances, delinquencies, risk scores, and the U.S. Census block group associated with a borrower’s address. We limit the sample of student loans to only those owned by the federal government in the second quarter of 2022. This exclusion results in a total of 38 million borrowers with outstanding student debt totaling $1.418 trillion. This aligns closely with publicly available data on holdings by the U.S. Department of Education which report a total of $1.476 trillion combined across Direct loans, Family Federal Education Loan (FFEL) balances owned by the federal government, and defaulted FFEL balances which are all eligible for forgiveness. We attribute the $58 billion shortfall in our estimate of total outstanding loans to balances that were defaulted more than seven years ago and thus no longer appear on credit reports.
The White House plan calls for cancelling loans for borrowers earning less than $125,000 (individuals) or $250,000 (households). Borrowers who received a Pell grant while in college would receive up to $20,000 in cancellation, while those who never received a Pell grant would receive up to $10,000. We estimate the probability of Pell grant receipt for each borrower by combining information about the household income distribution of each borrower’s neighborhood when they first borrowed federal student loans with data from the National Center for Education Statistics on Pell grant receipt by income and dependency status. Our algorithm produces a Pell grant rate among federal borrowers of 59.6 percent which is on par with the estimate from the administration of 60 percent. We estimate the probability that each borrower is under the income threshold using the household income distribution from the American Community Survey and the national income distribution of student loan borrowers by age and credit score from the New York Fed’s SCE Credit Access Survey. More details, including a discussion of the advantages of our data and methods, can be found in our Technical Appendix.
How Much Debt Is Forgiven?
As noted above, we estimate that the White House plan would cancel $441 billion in outstanding loans, accounting for 31.1 percent of the student loan portfolio owned by the federal government. This plan would also cancel 42 percent of student debts that were in default or severely delinquent prior to the pandemic. Our analysis indicates that 40.5 percent of borrowers with loans owned by the federal government would have their outstanding federal balance completely forgiven. In addition, we estimate that 5.1 percent of borrowers will be ineligible for loan cancellation due to the income restrictions.
Who Benefits?
As in our prior post, we consider the effects of the cancellation plan through the lens of income level and geography. First, we examine the distribution of beneficiaries by deciles of median neighborhood income. In aggregate, between $40 billion and $47 billion in debt would be cancelled for each income decile, and the amounts are relatively stable up to the highest-income decile, which sees a decline due to the income criteria. In the chart below, we plot the average federal student loan balance held in each decile alongside the average amount of forgiveness. Although the average forgiveness amount per eligible borrower is relatively stable across income (but declining throughout), lower-income borrowers tend to have smaller balances, so the forgiveness amount is a much larger share of their balances. The average forgiveness amount makes up nearly two-thirds of the average balance in the lowest income areas, where borrowers are also likelier to be receiving Pell grants. But the highest income areas will see a more modest reduction of their balances. Average balances in the wealthiest areas topped $35,000 before the forgiveness event and these borrowers were less likely to receive a Pell grant. Considering the extremely high debt-to-income ratios of borrowers in the lower-income deciles, the cancellation of balances will significantly improve these borrowers’ financial positions. For example, borrowers in the second income decile had student loan balances more than 50 percent of their annual income before forgiveness, but post-forgiveness will see more than a 20-percentage-point reduction in their implied debt-to-income ratios.
Borrowers in lower-income neighborhoods would receive the largest reductions in balances
Note: The percentage figures depicted within the bars denote the percent reduction in average balances for each decile relative to the average forgiveness amount for each decile.
In the next chart, we show that the prevalence of federal student loans is relatively constant across the bottom nine deciles with each decile having between 11 percent to 13 percent of the adult population owing federal student loans. This share drops to 9.5 percent for the highest income neighborhoods. After the proposed cancellation, the share with federal loans is cut roughly in half for the lowest-income neighborhoods, largely because borrowers in these neighborhoods have smaller balances and a greater probability of having received a Pell grant.
Student loan prevalence in the lowest-income areas will be nearly halved after forgiveness
Notes: Under the forgiveness plan, some borrowers will see their debts completely cancelled. The percentage point figures within the bars denote the percentage point decline in the shares of the adult population holding federal student loans as a result of the forgiveness event.
Next, we examine how loan cancellation affects the stock of delinquent and defaulted federal student loans. Since the administrative forbearance on federal student loans, which began in 2020 and has been extended since, marked all delinquent loans as current, we hold fixed the loan status for each loan at its value in February 2020 but use reported balances as of the second quarter of 2022. As we note in the introduction, approximately 42 percent of balances that were delinquent or in default prior to the pandemic will be forgiven. But these forgiven delinquent balances are not evenly distributed—lower-income areas previously held higher shares of delinquent debt and will see a substantial reduction in the balances that were delinquent or in default. This total amount and the share are declining across the income deciles.
Previously delinquent and defaulted debt is reduced by more than 40 percent in lower- and middle-income communities
Note: The percentage figures depicted within the bars denote the percent reduction in (pre-pandemic) delinquent or defaulted debt for each income decile due to loan forgiveness.
Lastly, we present statistics for federal student loan cancellation by borrower’s state of residence. On the left of the panel chart below, we present the average amount of debt forgiven per eligible borrower by state. The seven with the highest average amounts are in the Southern Census region: Washington, D.C. (largest), North Carolina, Georgia, South Carolina, Alabama, Mississippi, and West Virginia. The six states with the lowest average forgiveness amount per eligible borrower are all in the West: Utah (smallest), Wyoming, Hawaii, Alaska, Nevada, and California. In the right chart panel, we present the share of the adult population receiving any forgiveness. Again, many Southern states lead in this metric with Ohio joining Georgia, Washington, D.C., South Carolina, and Mississippi as the areas with the largest share benefitting, and Western states have the smallest share of the adult population receiving any loan cancellation.
Income limits and regional income disparities send more average benefit to Southern states
State of Student Loans after Forgiveness
This debt jubilee event, if it comes to pass, will be the most significant policy in the financing of higher education since the introduction of modern Pell grants fifty years ago. While the premise of a large-scale debt forgiveness has existed since ancient times, there are few recent equivalents to use as a historic baseline to understand future impact, particularly since student loans are difficult to discharge in bankruptcy. The only other (albeit smaller-scale) debt cancellation event studied recently resulted in a large reduction in defaults for other debts, higher geographic and labor mobility, and higher earnings for borrowers whose debts were cancelled. Without prior large-scale experiences to look to, the fact remains that student loan borrowers have experienced more credit distress than non-borrowers. Troubled student loan borrowers have lower credit scores, and often struggle with repaying their credit card and auto loan debts, and are less likely to own homes. The reduction in student debt prevalence and balances will create a substantial financial improvement for borrowers, particularly among those with lower incomes. As details of the plan continue to emerge, we will monitor the borrowing appetite of the forgiven borrowers, as well as the credit performance on their other debts, to study the extent of the effect of the broad loan cancellation.
Jacob Goss is a senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.
Daniel Mangrum is a research economist in Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Joelle Scally is a senior data strategist in the Federal Reserve Bank of New York’s Research and Statistics Group.
How to cite this post:
Jacob Goss, Daniel Mangrum, and Joelle Scally, “Revisiting Federal Student Loan Forgiveness: An Update Based on the White House Plan,” Federal Reserve Bank of New York Liberty Street Economics, September 27, 2022, https://libertystreeteconomics.newyorkfed.org/2022/09/revisiting-federal-student-loan-forgiveness-an-update-based-on-the-white-house-plan/.
Disclaimer
The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).
Disclaimer
An author of this post holds federal student loans.
Government
Are Voters Recoiling Against Disorder?
Are Voters Recoiling Against Disorder?
Authored by Michael Barone via The Epoch Times (emphasis ours),
The headlines coming out of the Super…
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Authored by Michael Barone via The Epoch Times (emphasis ours),
The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.
With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.
The primary results have spotlighted some of both nominees’ weaknesses.
Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.
Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).
Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.
When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.
High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.
There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.
Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.
Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.
The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.
More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.
St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.
Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.
In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.
2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.
Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.
Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.
Government
Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence
Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence
Authored by Zachary Stieber via The Epoch Times (emphasis ours),
The…
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Authored by Zachary Stieber via The Epoch Times (emphasis ours),
The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.
VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”
He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”
Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”
The agency searched for such data and did not find any.
“The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.
“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.
The VA’s mandate remains in place to this day.
The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.
There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.
President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.
President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.
“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.
Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.
“By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.
The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.
“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.
“This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”
The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.
A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.
Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”
Government
Low Iron Levels In Blood Could Trigger Long COVID: Study
Low Iron Levels In Blood Could Trigger Long COVID: Study
Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate…
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Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.
A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.
Long COVID Patients Have Low Iron Levels
Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.
In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.
According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.
But it can jeopardize a person’s recovery.
“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”
The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.
“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”
The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.
1 in 5 Still Affected by Long COVID
COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.
Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence
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Low Iron Levels In Blood Could Trigger Long COVID: Study
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Are Voters Recoiling Against Disorder?
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