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You can have it all, too. Visit cmhserviceindustry.com to learn more. Big news from the United States for those who have student loans. It seems probable, based upon yesterday's announcement by President Biden, it seems probable that if you have student loans, federal student loans, and if you earn under $125,000 per year, that some portion, up to 10, or in some cases $20,000 of your loans, will be reduced, forgiven, canceled by the federal government.

Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. My name is Joshua Sheets, and today we're going to talk about this student loan news.

First, I want to go over what it actually means, a fact sheet of what's actually happening, what the government says it's going to do, what are the rules for qualifying. We'll talk a little bit about planning ideas. Are there some financial planning ideas that you can implement or things that you can do to make sure that you get the most government money that you can?

And then number three, we'll talk about general response and reaction to this. What does this mean in terms of a social context, a political context? What does this mean for people who have paid off their loans, et cetera? So let's begin by reading the fact sheet published at whitehouse.gov.

Fact sheet, President Biden announces student loan relief for borrowers who need it most. A three-part plan delivers on President Biden's promise to cancel $10,000 of student debt for low to middle income borrowers. President Biden believes that a post-high school education should be a ticket to a middle class life.

But for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. During the campaign, he promised to provide student debt relief. Today, the Biden administration is following through on that promise and providing families breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.

Since 1980, the total cost of both four-year public and four-year private college has nearly tripled even after accounting for inflation. Federal support has not kept up. Pell Grants once covered nearly 80 percent of the cost of a four-year public college degree for students from working families, but now only cover a third.

That has left many students from low and middle income families with no choice but to borrow if they want to get a degree. According to a Department of Education analysis, the typical undergraduate student with loans now graduates with nearly $25,000 in debt. The skyrocketing cumulative federal student loan debt, $1.6 trillion and rising for more than 45 million borrowers, is a significant burden on America's middle class.

Middle class borrowers struggle with high monthly payments and ballooning balances that make it harder for them to build wealth like buying homes, putting away money for retirement, and starting small businesses. For the most vulnerable borrowers, the effects of debt are even more crushing. Nearly one-third of borrowers have debt but no degree.

According to an analysis by the Department of Education of a recent cohort of undergraduates, many of these students could not complete their degree because the cost of attendance was too high. About 16 percent of borrowers are in default, including nearly a third of senior citizens with student debt, which can result in the government garnishing a borrower's wages or lowering a borrower's credit score.

The student debt burden also falls disproportionately on black borrowers. Twenty years after first enrolling in school, the typical black borrower who started college in the 1995-96 school year still owed 95 percent of their original student debt. Today, President Biden is announcing a three-part plan to provide more breathing room to America's working families as they continue to recover from the strains associated with the COVID-19 pandemic.

This plan offers targeted debt relief as part of a comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families. The President is announcing that the Department of Education will provide targeted debt relief to address the financial harms of the pandemic, fulfilling the President's campaign commitment.

The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for married couples.

No high-income individual or high-income household in the top 5 percent of incomes will benefit from this action. To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.

Make the student loan system more manageable for current and future borrowers by cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5 percent of a borrower's discretionary income—half of the rate that borrowers must pay now under most existing plans.

This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers. Fixing the broken Public Service Loan Forgiveness Program by proposing a rule that borrowers who have worked at a non-profit in the military or in federal, state, tribal, or local government receive appropriate credit toward loan forgiveness.

These improvements will build on temporary changes the Department of Education has already made to PSLF, under which more than 175,000 public servants have already had more than $10 billion in loan forgiveness approved. And protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices.

The President championed the largest increase to Pell Grants in over a decade, and one of the largest one-time influxes to colleges and universities. To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free. Meanwhile, colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.

This Administration has already taken key steps to strengthen accountability, including in areas where the previous Administration weakened rules. The Department of Education is announcing new efforts to ensure student borrowers get value for their college costs. And provide targeted debt relief, fulfilling the President's campaign commitment. To address the financial harms of the pandemic for low- and middle-income borrowers and avoid defaults as loan repayment restarts next year, the Department of Education will provide up to $20,000 in loan relief to borrowers with loans held by the Department of Education, whose individual income is less than $125,000 for married couples and who received a Pell Grant.

Repeat, repeat, repeat, repeat. Blah, blah, blah. And blah, blah, blah. Same old, same old. I think that's enough. So you get the idea of the White House's press relief and propaganda piece there. U.S. Department of Education, Biden-Harris Administration announces final student loan pause extension through December 31, and targeted debt cancellation to smooth transition to repayment.

It goes on with some details. So in essence, what do you need to know? Well, let's read from the Wall Street Journal, "Student Loan Forgiveness, Who Qualifies for a Student Loan Forgiveness Plan and What It Means for Borrowers. Millions of Americans with student debt stand to get relief. President Biden's student loan plan will reduce or wipe out the debt of millions of borrowers.

The plan eliminates up to $10,000 in federal loan debt for individual borrowers with annual incomes of under $125,000 or couples who earn less than $250,000. Many borrowers will be eligible for total forgiveness up to $20,000 if they received Pell Grants, a form of federal financial aid awarded to students from low-income households.

"We're in unprecedented territory," said Scott Buchanan, executive director of the Student Loan Servicing Alliance. "This has never been done before. The plan is expected to benefit the majority of the more than 43 million people in the United States who hold a total of $1.6 trillion in student loan debt." Skipping down, a couple of questions.

Who is eligible? We've covered that. You're eligible for $10,000 in relief if you earn less than $125,000 a year or $250,000 a year for couples. The income limit applies to gross adjusted income from 2021 or 2020. People who received federal Pell Grants in college will also be eligible for up to $20,000 in forgiveness.

Around 6 in 10 borrowers with any federal loans also received a Pell Grant, according to the White House. And Pell Grant recipient graduates hold about $4,500 more in debt than other graduates, according to a 2020 analysis. When will forgiveness take effect? The timing remains uncertain, but the Education Department has promised more details in the weeks ahead, at minimum before student loan payments resume in January 2023.

Do I need to take action to receive debt relief? Not yet. Wait until you receive a notification from your loan servicer, Mr. Buchanan said. Beware of any friendly-sounding phone calls or suspicious-looking emails from addresses you don't recognize. It's a very complicated process and it's going to take months to effectuate, he said.

Don't do anything until you see something happen to your account. Meanwhile, double-check the information you've already shared with your loan servicer and the studentaid.gov website. If you've recently moved or changed any contact information, you're going to want to make sure that they have the most up-to-date addresses, said Mark Kantrowitz, a student loan expert.

What if I have private student loans? Only federal debt is eligible. What if the amount I owe is under $10,000? If you owe less than $10,000 on your loan, or $20,000 for those who received Pell Grants, then congratulations, you'll now be student debt-free. President Biden's plan will wipe out the debt of around 15 million borrowers.

Is the pause on student loan payments extended? Before today's announcement, loan payments were expected to resume on August 31. Now, borrowers will see the pause extended through the end of the year. Interest accrual and collections remain on pause as well. Are parent plus loans eligible? Yes, an individual student is limited in how much money they can take out on federal loans, but through the parent plus and grad plus programs, families can borrow the total cost of attendance, including room and board and other expenses.

This forgiveness applies to federal loans for both undergraduate and graduate programs as well as to parent plus loans, White House officials said. Is my debt forgiveness tax exempt? Debt forgiveness is often treated as income on taxes, but unfortunately for borrowers, this canceled student debt is federally tax exempt, as seen in other federal student debt forgiveness programs.

Under existing state laws, in as many as 13 states, student loan forgiveness could count as taxable income on state income tax returns, according to Jared Wolsak, blah blah blah. What if I've already paid off my loans? As of the end of last year, fewer than 1.2% of borrowers continued making payments on their student loans, Mr.

Kantrowitz said, but some of the borrowers took advantage of the two plus years of optional, interest-free payments to wipe out their debt entirely. This measure won't apply to balances that have already been paid off. In other words, sucks to be you. You missed out on your free money. So that's the facts of what you need to know.

Now let's talk about planning. Are there some planning opportunities? For here I want to go directly to Jeff Levine, CPA, PFS, and CFP, who is an extremely prolific Twitter @CPAPlanner on Twitter. Wonderful Twitter account, works with Michael Kitsis as one of his financial planning nerds. So let's go with Jeff's discussion on planning opportunities, one of the best financial planners to cover current events in detail.

So for many, the headline news from today is the potential forgiveness of a substantial amount of student debt. In general, maximum debt forgiveness is limited to $10,000 per borrower, except for a Pell grant to $20,000. A few important clarifiers. It's not $10,000 plus $20,000 if you got a Pell grant.

It's $10,000 plus $10,000 more for a total of $20,000. I've seen that misreported several times today. Debt of Pell grant only boosts max loan forgiveness for undergrad. Pell grants themselves don't generally have to be repaid. So it's not that the extra money is for Pell grant repayment, it's extra forgiveness on loans because the person also got a Pell grant, which tend to go to lower income households.

Now let's talk about who qualifies for this relief. Most taxpayers with federal loans will be eligible for the relief, but as income exceeds, certain levels, the forgiveness is eliminated. It sounds simple enough, but there's actually a lot here to consider. Let's start with the thresholds. Filing as joint or head of household, you have $250,000 limit.

Single or married filing singly, $125,000. Now it's going to get interesting. What's income? Unclear, but I'd suspect it's going to be AGI, Adjusted Gross Income, which is the type of income that income-driven repayment plans start with. What year or years are the income limits in reference to? 2020 or 2021?

If in at least one of those years an individual's income was below their applicable threshold, they get the forgiveness. Side note, the administration sort of has to do it that way. They're using the pandemic emergency as the justification for forgiving the debt legally. Are those income thresholds a cliff?

I'm not totally sure, but it certainly appears so, which sort of creates some strange inequities. In retrospect, you'd be way better off earning $124,000 in 2020 and 2021 and getting $10,000 of forgiveness than if you had earned $125,000. Now let's talk about planning. Sadly, for most people, there is no real planning that can be done.

Whatever their income was in those years, it was. End of story. But that's not to say there aren't at least some planning opportunities out there. Two come to mind. First, business owners who have not yet filed their 2021 tax returns may want to give serious thought to beefing up retirement contributions.

Even if it means giving more to employees than normal, getting AGI low enough to qualify for relief may more than make up for it. Sorry, tweet thread messed up. On the income side of things, all the forgiven debt will be tax-free at the federal level. Things are dramatically more complex at the state level.

In some states, it's already tax-free. State has no tax, conforms to federal rules, or has its own exception. Some states, which don't currently have an exception, will create one, and instill others the discharged debt is going to be taxable. Oof. Kevin Cant has a good article on this, but I would anticipate more changes before year end.

This is from thecollegeinvestor.com. Okay, on to which loans qualify and which don't. In general, federal student loans qualify for relief. Private loans do not. Some specifics. Parent PLUS loans are eligible for forgiveness. Relevant income is that of the borrower, parent, and appears to have no impact on a child's eligibility to get forgiveness.

So in theory, a parent could have $10,000 of parent PLUS loans forgiven, and the childhood loans were taken for could have up to $20,000 of their own debt forgiven. On the flip side, parents with $30,000 total parent PLUS loans, split evenly across three kids would appear to qualify for only $10,000 of forgiveness.

Graduate school loans are also eligible for forgiveness, up to $10,000. One thing that's not clear is how FFEL program loans will be treated. I strongly suspect that federally owned loans will be eligible for relief, but that privately held FFEL program loans will not. This is, objectively, an incredibly unfair result for those whose FFEL program loans are still held by private companies.

Essentially, luck of the draw is determining who's getting a $10,000 break. Oh, one more here on which loans count. Student debt of active students is also eligible for relief, provided loans were funded by June 30, 2022. True for everyone. Important point, if the student was claimed as a dependent, you need to use the parent's income.

Finally, how do you actually get forgiveness? Well, for many it will essentially be automatic because the Department of Education already has income information on file. For everyone else, a "simple" application will be made available by year-end. Okay, moving on to other aspects of the announcement. Prior to today, the current 0% interest rate and moratorium on federal student loan payments was set to expire at the end of the month.

But per today's announcement, we will have another. I think this may be #5 just during the Biden era, with several before under Trump. Extension, this time until December 31, 2022. What's different this time is it appears to be the end of the line. Both the White House's fact sheet and President Biden directly in his address made clear this is the final such extension.

Reminder only applies to federal debt. I know. Last item we'll dig into for tonight is the administration's plan for a new income-driven repayment plan. There are already 5 of these things and now we're going to add a 6th. Added complexity is the downside, the upside is the new IDR, income-driven repayment plan, will offer material improvements for many borrowers, including new baseline for non-discretionary protected income of 225% of the federal poverty line income, currently 150% in most instances, maximum annual payments of 5% of discretionary income for undergraduate loans, and 10% for graduate loans, currently 10-20% depending on the program.

Note borrowers with both loan types will have a weighted average maximum loan payment calculated. Good luck to whoever gets that job. Balances won't increase as long as monthly payments, including $0 payments due to lower income, are made on time. Remaining balances will generally be forgiven after 20 years of payments, but where the original balance was $12,000 or less, substitute 10 for 20 years.

One last point to make in light of today's announcements, please remember that there is currently a special opportunity with respect to the PSLF program. In short, there's a limited amount of time during which individuals can apply for waivers to have prior payments that would not normally count towards forgiveness considered for that purpose.

This is huge. The PSLF program isn't limited to $10,000 of debt. It can make all of an individual's qualified student debt disappear after 10 years of qualified payments. For more info, it gives a link to studentaid.gov/announcements. And so that is the current planning information. So there's not much you can do, but if you can reduce your income through things like additional retirement contributions or something else to reduce your adjusted gross income for 2021 below the applicable limit, then possibly that will make you eligible for the student loan forgiveness.

So now let's pivot to some commentary on the topic, kind of more broadly from an economic perspective, from an ethical perspective, etc. Because I think that's interesting. There's not a lot that you can do to change this. It's being done by executive order, by executive fiat. Time will tell.

So the first thing that will be interesting to see is if this actually goes through. An announcement is one thing, but this is legally probably on pretty thin ice. It's my understanding that the president is seeking to do this under the emergency powers granted by the pandemic. And so that's why we have to do it now.

That's why everything's kind of wrapped up in yes, 2020, 2021 numbers, etc. Maybe this will fly. Maybe there's some legal issue. I'm not a qualified commentator on that particular topic, but it's certainly on thin ice. And I think that it very clearly, if it's not technically illegal, if it's not challenged, and again, I have no reason to know one way or the other, it certainly violates the basic structure of American politics and the structure, the basic idea of constitutionality.

The American president is not supposed to have powers to unilaterally choose to come into office and wave his magic wand and give money to a certain class of people and take money away from another certain class of people to do that. So whether it's actually held up by a court debate of some kind, whether it happens or not, we don't know.

And this is very clear and obvious, even from the politicians' mouths themselves. You can go and you can find plenty of quotes of leading democratic politicians simply saying, "Yeah, the president doesn't have the authority to do this." Let me read to you directly from Speaker Pelosi's words. I'm reading from speaker.gov/newsroom/72821-2, which is a transcript of the Pelosi Weekly Press Conference for July 28, 2021.

And the question says, the question says, sorry, I went up to find the, here we go. Question, there's been a lot of back and forth between the administration and Democrats here on Capitol Hill about student loans and canceling student loan debt. Each have said, "Well, the president can do this by executive order." The president said, "Oh, let's do it by legislation." Could you explain why the administration and Democrats in Congress pushing for this or fighting this?

And I mean, it would seem there's not the votes to pass the bill. Is that in fact the case? Is that why Congress is, Speaker Pelosi? No, but thank you for your question. It's so refreshing to get a question on substance and process, but not responding to whatever. Here's the thing.

People think that the president of the United States, is this more on the subject than you ever want to know? Well, you'll let me know. People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power.

That has to be an act of Congress. And I don't even like to call it forgiveness because that implies a transgression. It's not to be forgiven, just freeing people from those obligations. So the question of who gets forgiven, to use the term of art that is out there, is a debate.

Do we use whatever money there is for the broadest base of support of those with more people with even less debt or fewer people with more debt? That's a policy discussion. But the difference between the president, the president can't do it. So that's not even a discussion. Not everybody realizes that.

But the president can only postpone, delay, but not forgive. Question. And that said, following up, what would be the parameter? And what would be fair to those who have incurred major debts, repaid them, or are still working to do so? Speaker Pelosi. Yeah. And question. And then if, say, something were to go through, say, okay, this group had to pay and this group does not.

Speaker Pelosi. Yeah, well, you, there you are. You've described it very well. I do think that what the president is putting forth, and build back better in terms of opportunity for all Americans, whether they go to college or not, you know, they may not even aspire to that. And that's fine.

And that's fine. But we do want to give them vocational training or other opportunities so they can reach their fulfillment as well. So this is a broader discussion. But it is, it's not one that we're going to solve right here and now. But you, you, that would be an attitude that people would have.

But even take it on top of that. Suppose your family was not, your child just decided they want to, at this time, not want to go to college. But you're paying taxes to forgive somebody else's obligations. You may not be happy about that. But you know what? We want all of our kids to reach their fulfillment.

To the extent that they want to go to college, we do not want them to be prohibited from doing that for financial reasons. I've had high school students come in here and say, with their grades, they're able to be accepted in the Ivy League here and there. But their family's economic situation does not enable that to happen.

Because they have to stay close to home to work to be part of the family situation. So what we'd like to do is have an economy that is fair, that gives opportunity and does not hold anybody back because of financial reasons. And again, how some people may view the relieving people of this obligation has to be viewed in a fair way where we have something that gives opportunity.

That's the big word. Opportunity to all of America's families. Yes, yes. And we go on to more questions. So that is a verbatim reading of the question answer from Speaker Pelosi of just over one year ago. So legally speaking, the president is on very thin ice here. But time will tell what will happen.

Of any branch of government, I have the most faith in the judicial branch, but I don't have much faith at all in it. So time will tell whether some legal challenge comes, whether this happens or not. I think what Speaker Pelosi pointed out though, there is at the core though of what is really angering a lot of Americans.

There are many people who are very happy. There are many people who have student debt who are very happy that their student debt will be reduced by again up to potentially $20,000. And I hope, it's my earnest and sincere hope that for those people who have their debt reduced, that it will enhance their financial opportunity and that they will be able to stabilize their finances.

I hope that they'll be able to make wise decisions with their money. I hope they'll use that money that they were granted with great fortune, and I hope that they'll take it and they'll invest it back into their communities, into their societies. And I hope that they will be grateful for the forgiveness that was given to them.

I think for many of us, it's hard to think that $10,000 or $20,000 was going to change much about your overall situation. It doesn't seem like that much money to most of the listeners of Radical Personal Finance. But for many people it is. It is a substantial amount of money and it may provide some very welcome relief for them.

And so I hope that this cancellation helps them and helps them to improve and solidify their overall situation. We do want for a strong and stable society, we want to have maximum financial stability among our fellow citizens. Now it is clearly a naked political move to do this at this particular time.

And so I think it's fair to simply accept that as being self-evident and not worry too much about it. That's what politicians do. In the modern age, we elect politicians to take money from other people and give it to the people that we think should have it. That's basically what we do and we shuffle them all around.

And that has long-term effects on the basic nature of a society and of a government, but the politicians are simply doing what the politicians need to do. Politicians are very worried about midterm elections and so this needed to happen now so that there would be some hint of justification due to the COVID policies.

But it also needed to happen now so that they can potentially get some political breath prior to midterm elections coming up fairly soon. On the other hand, this will give the Republicans political fodder to talk about what the Democrats are doing. I think very clearly it's causing a lot of people to feel upset if you've done things like pay off your loans.

I read you two personal text messages that I received from friends of mine within about 20 minutes of each other. And one friend says this, "Paid off all of my wife's law school student loans this summer because I'm a big fat chump lol. Now that I'll be paying off everyone else's loans too, I'm just grateful that I have a lot of practice." It was one friend of mine.

And then another friend wrote to me completely unsolicited and said this, "My mom co-signed on my sister's useless gender studies degree and it put my mom in a really bad financial spot. She ended up paying it off in a lump sum a few months ago to save on interest, dropping $40,000 or so, and planning on my sister paying her back.

If she waited a few more months, she would have saved $10,000 or $20,000. I'm not sure if she has Pell grants or not. My mom is not excited. Obviously, multiple mistakes were made, but Biden is not helping." And so that's a reaction from two people. I'm sure that there are many other people who have done that.

And this is one of the biggest problems with the biggest moral and ethical and even civilizational problems with government programs. That people who do the right thing, people who behave responsibly, often feel like they get screwed. And people who do the wrong thing, those who behave irresponsibly, who take out too much in student loan debt, or who don't make alternative decisions, it feels like they get all the good stuff.

And this is one of my biggest long-term concerns with basically the fabric of our civilization. For example, so many things we go through. Let me give one kind of wide-ranging example and we'll come back to politics. I'm convinced myself that one of the things that sows more discord at the heart of our society is the welfare state.

The idea that the basic function of government is to take from some people and give to others, and that politicians get to decide who we take from and who we give to. And this puts a deep level of distrust in society. Let me use an example I mentioned in passing.

I recently was talking about immigration, and I mentioned that I myself would prefer that the government have no immigration laws hindering the flow of non-criminal persons into the country. Let me define a couple of terms there for just a moment so you understand my opinion, and you'll see why the welfare state is important.

The reason I believe this is twofold. Number one, I have a hard time seeing why any government entity has the right to say who can and cannot live within its borders. What gives somebody the moral right, what gives a government official the moral right to deny someone else the ability to travel on its borders?

I don't see that as a moral right, it's just simply a right of force. Whoever has the force can make whatever rules they want. But more importantly, I think government bureaucrats are stupid. And I can't possibly understand how anybody could think a government bureaucrat could figure out the appropriate number of people to live in one country, or to admit a certain number of workers for a certain occupation.

And so we need to issue 100,000 visas for people in this occupation, we need to do this thing. Government bureaucrats are stupid. Central planners are stupid. They're stupid and they're incompetent, and they're stupid and incompetent whether they're in the USSR, or whether they're in the CCP, or whether they're in the USA.

Government bureaucrats are stupid and incompetent. And every government bureaucracy is bloated, expensive, and an absolute waste and drain on productive people all over. The US Immigration Department, from personal experience with many friends, is the stupidest perhaps of all immigration departments in the world. The most dysfunctional, horrifically performing. Some people have visas at sale right through.

I recently met some immigrants from France who had come into the United States, and they had applied for the lottery, they had to get out of France, they didn't feel like it was safe to live in France anymore. They applied for the US Green Card lottery, they were granted, and basically a few months they were given access to the United States and everything worked.

When I compare that to the dozens of stories that I've personally known of people who've waited years and years and years and years and years and years, while in various forms of the process, I was absolutely shocked. I want to give credit where credit is due, it worked for at least one person.

So I don't think that a government agent is smart enough, or in any way informed enough, to have an idea about how many people, how many workers should be able to come into a country or how many people should be allowed to come in under a certain kind of visa.

And I trust the wisdom of the crowds and supply and demand far more than I trust a government bureaucrat. So does that... But what's the problem? Why is anti-immigrant sentiment so high in the United States and in many places around the world today? Well, I think at its core, one of the reasons the anti-immigrant sentiment is high is not because of any kind of overt racism.

It's not because of any kind of xenophobia. I don't think... I think the United States of America is, at least in my experience, the least racist place in the world that I've ever had the privilege of traveling. There may be other places, but in actuality, it's the least racist place that I have been to.

So Americans don't generally care about the color of the skin or where their neighbors came from. It's not a matter of xenophobia, why the immigrant sentiment is... the anti-immigrant sentiment is high. I think it's a matter of the welfare state. And the idea is, true or not, the idea or the impression that people have is, "Well, those immigrants come here, they don't pay taxes, they go to the hospital, they get free hospital care, they get free education, they get free this, free that, free government money of all kinds, and they take advantage of the system." So when I ask people who are virulently anti-immigration if they would feel the same way if there were no welfare state, so far, my experience has been that unanimously no.

People recognize that other people are people and they can do it, but they feel they're taken advantage of. They feel like immigrants are a burden on the system and that too much money goes to them. Now set aside whether that's actually true or not. I'm skeptical, but set that aside.

The point is that I think you can have one or the other. You can either have an open border or you can have a welfare state, but you can't have both. Because if you have an open border and you have a welfare state, then you open yourself up to people taking advantage of those programs excessively of the worst kind and you drive out the best kind.

So you can have one or the other. So as long as you can have a welfare state, you have to have strict restrictions on immigration. So bring that to the modern day and bring it back to student loans. I think this is one of the big issues that is fundamentally bubbling and causing massive division among the American population, among the American citizenry.

People are angry about the idea that something is being taken from them and given to someone else. They're angry about it. And this doesn't help. This sows the seeds more and more. And again, with those government programs, because governments are seeking to try to shore up the weakest among us, but because governments can't discriminate based upon merit and virtue, you wind up with crazy proposals like this particular proposal.

And responsibility is now a vice rather than a virtue. There are many, many, many, many people who have been given wise counsel regarding college and college debt. There are many people who have chosen to not go to college because they didn't feel like they were ready for college and they didn't see the point of spending money on a program that was on something that wasn't a good fit for them.

There are many people who chose to go to less expensive colleges because that was what they could afford. There were many people, there have been many people who have chosen to go to colleges that to stretch out their college so they could work their way through, to take a manageable course load, etc.

in order to avoid student debt. And then there have been many, many graduates who have graduated from school with student debt and who have worked diligently to pay off their student loans. And all of those people feel now like they were the chumps. They feel like they were stupid.

And yet those were the people who behaved responsibly. And the people who feel really smart right now are those who had student loans, who strung out their student loans, who didn't pay them back. And by the way, that was in many cases, it was a very smart thing to do not to pay your student loans debt but debts back because of deferred payments, because of income-based repayment plans, because of low interest rates, etc.

guaranteed by the federal government. There are many people though who, the people who feel smart are fundamentally those who borrowed money. Now you know of course, right, you know that a certain portion of the people really need that relief. And you're glad for those people. Even if you're gnashing your teeth about this policy, you're glad for those people.

But this kind of decision is basically the expression of the stupidest kind of government program that you could have. It's also an expression of stupidity because it's the government, the federal government itself that seeded the miscalibrations in the college marketplace due to these federal loan programs in the first place.

So I started with the White House's press release and right in the front part of the government propaganda piece, the government says, and I quote, "Since 1980, the total cost of both four-year public and four-year private college has nearly tripled, even after accounting for inflation." Well, why might that be?

Well, it has to do with the entire system of student loans and the way that the government guaranteed the money, student loans not being bankruptable, and then colleges going after the money intensively. And so they seeded the crisis, they created the problem in and of themselves, and now they're offering the solution to the problem.

But what's the other solution with the problem? Well, an estimate by the Wharton School says that the total cost of this particular program will be somewhere between $305 billion and $980 billion. Clearly a large range, but this right here, forgiving debt in a time of significant inflation, this right here will produce a dramatic economic boost that will drive inflation even more.

Will it be noticeable or not? I don't know. Even if it's a trillion dollars, is that noticeable? Time will tell. But having money forgiven frees up now that money for other things, and it's going to create its own problems. I'm reminded of the classic story that we love so much to tell.

I think it's true. It may be just apocryphal at this point in time, but I believe it's true of when the Indian government—it's the classic story of unintended consequences. The story goes that there was a town in India, a city in India somewhere, that had too many cobras, the snakes, the biting snakes.

They decided that they would offer a reward to people who would go out and bring cobras in for killing cobras so they could reduce the cobra population. They set a reward amount, making up numbers, $50 per cobra to bring people in, and people bring the cobras in. Well, people brought cobras in, the government paid the money, paid the money, paid the money, but they realized that, "Wait a second.

There are a lot of cobras being brought in." And what they quickly came to understand was that people had seen an opportunity to make some free money by raising cobras, and so they were actually breeding cobras and creating more cobras so that they could go and get free money.

Well, of course, the government politicians reacted and said, "Well, this can't work," and so they canceled the whole program. So now you had people who were breeding cobras. What do you think they did with all those cobras? Set them loose on the street, and now after the well-intentioned program, you wind up with a much higher cobra population.

So again, I think it's probably true, but I've never verified it. So regardless of whether it's a true story or not, it drives the point. You can easily understand how that would happen because you have now, because it flies. The story illustrates what we know of as incentives, incentives to behavior.

So the government creates a program and says, "Everyone needs to go to college," and after World War II, figuring out how do we get people in college and improve the productivity of our workforce, we come out with the GI Bill, and then later we start to see the growth of people going to college.

So then you have the federal student loan program. You have lots and lots of new colleges created. Why are the new colleges created? Because now money is easy to get. Why is the money easy to get? Because the government says, "We'll guarantee the loans for you, and your students can't bankrupt their way out of it." So you create massive new numbers of college, massive levels of college enrollment.

Some of those colleges, very high-priced, and in many cases flat-out abusive in terms of their recruiting policies, et cetera. You have virtually no obstacles to young people signing their life away, borrowing tons of money. It's as simple as a signature for most of us. And so you have then the colleges increasing tuition commensurate with that.

And then you have this incredible civilizational push saying that everybody should go to college. Clearly false, as I have detailed in other discussions. Most people are not suited for the academic life of college. And so then you have people go to college, many of them drop out. People are very hurt.

They don't have a college degree, but now they have debt. And then the whole situation goes in. So then what does the government come along? "Well, we're going to come along and we're going to cancel student loans." It's just one dumb policy after another, and a dumb policy leading to another dumb policy.

And that's what happens when you have this kind of system, when people are relieved of consequences for their choices. If lenders were not guaranteed by the federal government laws that student loans are not bankruptable, then bankruptcy would have wiped out so many of the student loans, the most egregious situations.

And because they're not bankruptable, that hasn't solved it. And bankruptcy is a much better policy for getting rid of debt, of toxic debt, because bankruptcy trains the lender and the borrower to be more careful and more discerning. And so it really actually hurts lenders. And so at its core, this is a disaster.

Now hopefully it's not a huge disaster. It's just one thing among many, but it's a disaster because it sows these seeds. And I'll give you an example from my own life of how this affects people. Anybody who's listened to more than a few of my podcasts knows that I'm not, very few people would classify me as an unopinionated guy.

I have my convictions, I have my opinions, and I do my best to be clear on them and then to try my best to live in accordance with them, imperfectly as we all do, but I try to be a fairly convictional guy. When I was younger, I believed very strongly in the idea of personal responsibility, taking care of yourself, taking care of yourself and not being a burden on the system.

I believed very strongly in being a kind of person who was a producer and a contributor rather than a taker. I believed strongly that it was morally right for me to take care of myself. And so the practical expression of this was that in 2008, when I was laid off from a job in 2008, but I myself, even though I was laid off from a job and a layoff and I would have qualified for unemployment payments, I thought, "Well, I don't need the money.

I have money saved. I didn't have any debt. I have money saved. I don't need the money and I don't want to be the kind of guy who takes a government handout." I actually am genuinely worried about ever becoming the kind of guy who takes a government handout because I'm worried about what that would do to my character.

I don't know that I'm a strong enough person to resist the weakness of my character if I wound up becoming the kind of guy who would take a government handout. So I said, "I'm not going to take it." And so I didn't file for unemployment. I spent some time, spent my own money, later wound up getting another job.

Four years later, I was doing financial planning and I'm watching all of these people who were getting extended unemployment payments under the 2008, all of the response to the 2008-2009 financial crisis. And I vividly remember I was sitting at somebody's apartment in Juneau Beach, Juneau Beach, Florida, beautiful little beach town.

And I was meeting with this lady who had moved down from New York and she had gotten laid off a long time earlier. And I'm sitting there doing financial planning and she's going to the beach every day, literally going to the beach every day, and she's enjoying the extended unemployment.

And she had milked her unemployment payments until the very last end of the number. I forget what it was, 52 weeks or something, all of the extensions. She's like, "Yeah, my unemployment is going to run out in two months so I'm going to have to figure out what I'm going to do and probably start looking for a job sometime soon." And I thought to myself, "Joshua, you schmuck.

What's wrong with you? You chump. Why didn't you take the money? What's wrong with you? You are a chump. What did your little kind of moral crusade accomplish for anybody? All it did was screw you. You would have been better off taking unemployment, milking it as long as possible, substituting with your own savings, do whatever is necessary to have the minimum action necessary to file the forms and move on.

And take the money and do something fun, right? Go travel and go do something interesting." And I felt like such a chump. And I promised myself from then on, "I'm never going to do that again. I'm just going to take the money." And so I've been self-employed and a business owner since then so I've never had the opportunity to get unemployment and file for it.

But I've done podcasts here on Radical Personal Finance about how to get laid off from your job so you get unemployment insurance, unemployment payments. And then also, of course, there is the factor that I understood finally that it was just an insurance program and if you get it laid off, take it.

But the point is that it changed me. And I really feel guilty about it because I still believe in the power of self-reliance. I still actually worry that if I ever got laid off and had a legitimate unemployment claim that if I started to get free government money or free insurer money, then it would harm my character.

So I worry about it. But since that time when I realized I was a chump, I've told people, "Take all the money you can get, right? They're giving it out to everyone else. Take all the money you can get." That is a cancer at the heart of society. But it's a major – hypocrisy is not the right word – discontinuity in my opinions.

But basically, I look at it and many people do. You're like, "Burn it all down, right? If we're all going to do this, then let's just burn it all down. Screw the concept of self-reliance and taking care of things. Let's just all get our money and, hey, bring the end on faster and then we'll figure out what's next." And that's destructive.

And yet millions – many people, I would guess – lots of people – I don't know the number – lots of people are looking at this news and they're feeling the exact same thing. And that's – I'm really – I think that's really dangerous for the American psyche because the American citizenry is one that has been traditionally built upon these concepts of self-reliance, upon the concepts of independence, on the concepts of taking care of yourself and of other people.

Oftentimes Europeans look on and they wonder, "Why doesn't the United States have as developed a welfare state as we do? What's wrong with that, right? Here's the United States, the only country in – the only advanced developed country in the world that doesn't have government healthcare, etc." Well, it's because this is a fundamental part of the fabric of the United States.

And so – but that fabric is being destroyed. That fabric is being dismantled. And so I don't think it's a tipping point. I don't think it's the thing any more than the bush bucks of sending out money or cash for clunkers or any of these other boneheaded programs that they come up with.

They're not the thing that leads, but it's all just – it's death by a thousand cuts. It's kind of a continual thing. And it fundamentally alters people. When you recognize that the government's going to send you stimulus money during a pandemic and you recognize that you can get – file for free programs or free money, you feel like a chump if you don't take advantage of it.

And so that changes the culture. And it changes the culture over generations and it has a long-term impact. What do you do about it? There's nothing you can do about it. If you want to be free out of it, you could do what I've done, which is one of the reasons why I pursued what I did with the whole internationalization stuff.

I think it's important to guard your own character. I think it's important to recognize that relying on this stuff is really dangerous. It makes you a slave. Relying on government money makes you a slave. I looked at – when the PPP program came out during the pandemic, I looked at it and I was like, "You know what?

I should get some of this money." Again, I have this long, festering wound from 2008, 15 years now. I'm like, "I just – I never get any free government money. How can I get some free government money?" And like, "Here's a program that seems tailor-made for me." But I looked at it and I said, "I'm not getting in bed with the government." So it has to almost be a convictional thing.

Like, "I don't want those people in my life." I'll try to control my speech a little more. "I don't want those people in my life." And it's the same thing with all the government money, right? The government money, all of the Title IX money is made that – it's destroyed the university scene.

It's made that all the colleges are beholden to the government because they take government money. So I think that you can strengthen yourself and say, "I'm not taking your money. I'm taking – I'm not going to take your money. Therefore, I'm not going to be accountable to you. I'm not going to have to follow your rules.

I'm going to do what I think is right." So time will tell. Time will tell. It's not something that is unifying. I guess the last point I would make is let's talk about a couple of practical effects. One of the things that bothers me so much about this is it's extremely classist.

Who benefits from this particular government action? Who benefits? Well, people who have student loan debt. Who are the people who have student loan debt? They are people who have gone out and gotten accepted to a college and started to go to that college and didn't pay for it fully out of their own pocket.

Whether they graduated or not, they're people who did that. So what that means is you have a certain class of person that has student loans. It's either someone who is accepted to college or somebody who has a college education. That is the class of person. Now who is paying for the money?

It's a government program, so it's coming out of taxpayer dollars, the general fund. Of course, those taxpayer dollars are fundamentally provided primarily by the top 5 to 10% of wealthy earners, income earners in the United States who pay most of the taxes. So you could argue that it's a classist thing where you're taking money from the richest people and you're giving it to basically the middle class college educated people.

The problem is the average citizen in the United States doesn't see himself as a taker. The average citizen in the United States sees himself as contributing. Even if it's a mere, you know, two cents, he still sees himself, "I pay my taxes. I file my tax returns." Remember that most people don't conceive of how much money they pay in taxes.

They don't know where to find it even on the tax form. And so this means that the lower class people, not college educated, not going to college, are now feeling like money is being taken from us and our taxes. We're good people. We pay our taxes and being used to pay for the middle class college elite.

And there's also a very strong correlation that Democratic voters tend to be college educated people predominantly, while Republican voters vary more, but more non-college educated people with student loans to be progressive Democrats, to be liberals. And so you wind up with this class competition. And at its core, I think this is one of the most destructive long-term trends.

Why do we have people bemoan and wail and moan and are upset about the division that we have in the American population? What causes it? Things like this, right? This constant class distinction. Class distinctions on any basis, but it's a continual thing. And it just kind of goes on.

The cancer goes deeper, the cancer goes deeper, the cancer goes deeper. And more and more people see themselves as divided people across the board. One of the things that bothers me the most, the Ten Commandments, God said, "Thou shalt not covet." "Thou shalt not covet." What is coveting? Coveting means wanting desperately something that someone else has.

And there's an implication that you want it to the point where you just go out and take it unjustly. That's the basic concept of covetousness. What is unjustly? Well, it means you didn't earn it for yourself. You want your neighbor's wife, so you go and you take your neighbor's wife.

You want your neighbor's money, so you go and you take your neighbor's money. Well, modern politics, basically redistributional politics, has rewarded broad-scale covetousness. And those who engage in it the most feel very good about it, right? They feel good because we're going to take from those people and we're giving to give to these people over here.

But covetousness, just like any sin, covetousness is a cancer, where the longer it goes, the worse it gets. The worse it gets, the more it destroys the host. And so you see that in society. Go and read a book like Alexis de Tocqueville's Democracy in America, and you'll see an extraordinarily different country than what we have today.

And you say, "What was different about 1850 versus 2022? What was different? Why?" And again, we need to be cautious against a golden era fallacy. Things were not necessarily always better. Politics have always been vicious, etc. But I think at its core, one of the things that is a cancer in our society is this concept of covetousness, this concept of continually, "I'm going to take from them, give to those people.

And I want political power so I can decide who gets taken from and who gets given to." And it's just a battle that goes on and on and on and on. So that was more negative than I intended. At its core, I don't think this is something that needs to be.

It's just one more factor. It's the same thing. Let me close with just a more neutral observation. How does this end? Where do we wind up? I'm convinced, before I go there, I should make two more points because they're important and worth thinking about. Why is student loan debt the debt that should be forgiven versus any other debt?

This has bothered me for years. If you really want to relieve people's debt, why not pay off their cars? If you really want to relieve poor people's obligations, why not pay off their credit cards? Why is student loan debt the debt that's being canceled? Now, there are a couple of obvious answers.

Number one, the federal government is involved in student loan lending. So in terms of administering the cancellation of a debt, then obviously it's easier for the Department of Education to administer the cancellation of the repayment of federally guaranteed student loans than it is to pay off credit cards. But that's not truly the ultimate obstacle.

Obviously, as we've seen with the stimulus money, they can just put money right in your bank account. So why? Why not just put money right in the bank account and say, "We're going to give everybody $10,000"? The other obvious answer is, "Well, we need smart people to go to college." I think this is clearly what most people would say.

It's like, "Well, we want to reward people who've gone to college and have developed their education and who've enhanced themselves. We want an educated workforce." And again, I don't think that that fits the basic idea of not creating classism, because the kinds of people who can go to college and the kinds of people who can get a college degree are the smartest people.

And in theory, that college degree should be paying off. There's one of the memes that's going around the internet right now that says, "If your college degree isn't good enough for you to pay it off, then why should I have to pay it off? Why is it good enough for me to pay it off?" So it seems strange to me that we would engage in paying off student loans because people who have gone to college are, by definition of our day, the most privileged people.

Why? Why not pay off other forms of debt? Why not just send out—if we're going to do a stimulus, why not just send $10,000 to everybody and tell everyone to pay down their debt? Wouldn't that be better? And I think you see that these programs, like, I don't—to me it seems obvious.

Either—why not—or—I'm stammering because I'm not trying to go too deeply into negative politics, but it's just—it's such a naked political gambit. It doesn't have a deep sense. If you want to—if you want to relieve the poorest among us, then relieve them directly. This is why perhaps one of the best programs has been the earned income credit on the taxes.

It's a direct way of giving people who are working, doing things virtuous, working, but who aren't earning very much, direct money. The earned income tax credit has been a wonderful tax credit. So if you're going to practice redistributionist politics, why not practice it in a way that's not related to student loans and student debt?

Why are we sending money to the smartest people who were able to successfully get into college and the people who society calls the most privileged? It doesn't make sense. My final point is this. If you take the logic of why we want to send money to people who have a student loan instead of other classes of people, if you take it to its extension, I think you're going to see why ultimately government colleges are going to be tuition-free for everybody.

And I have no idea, I'm just making up a number, but I would say 10 years, 15 years maybe, who knows? And again, I'm totally making it up, I have no logical argument to support that number. But here's why, and I read it to you in the White House's press release.

One of the other initiatives that the Biden press release writer said here, and I quote, "We want to protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices," and skipping down, "to further reduce the cost of college, the president will continue to fight to double the maximum Pell Grant and make community college free." So that's the current arena, the current frontier of this battle, is to make community college free.

So should community college be free or not? Well, I think, myself, my opinion is, yeah, either community college should be free or we should end the government school system. And since there's only a tiny fringe minority of people who think that ending the government school system is actually a good idea, then the most likely answer is make community college free and make four-year colleges free and make every other college free all the way through.

And to me, this seems like where we're most likely to end up practically in the United States. Number one, there's ample historic precedent for this. There's ample precedent all across Europe, higher education institutions are tuition-free, widely available. And in fact, in many European countries, those universities are tuition-free to anybody who can apply, have the appropriate academic credentials to be admitted, and can come from anywhere in the world.

For years, I've followed the most famous as Germany, that Germany will allow any international student who can come, have appropriate academic qualifications, test scores, et cetera, to come and attend their universities tuition-free. There are several Scandinavian countries, I mean, many European countries offer this. The question is whether the instruction is done in English or whether it's in a local language.

So often, the language barrier can often be substantial for people who are not from that region to go to a school, unless they offer more English instruction. But this is the trend. And I think this is probably where we wind up in the United States as well. I don't see any moral difference or any real, any like philosophical difference between having government school paid for from K through 12 versus government school paid for from 13 to 16, or from 13 to 18.

What's the difference at its core? There's, as I see it, there's no real difference. So eventually, it seems to me likely that we'll wind up with tuition-free government universities, and then we'll wind up with a, the continuation of private universities competing in the private market for students where there were tuition paid programs.

And is that a bad thing? I don't think so. I mean, you know, my libertarian utopia doesn't exist. It's never going to exist in my lifetime. So having tuition-free universities, fine, you know, fine. It's just, it's better than, better than incentivizing people for taking out debt than paying it off, probably.

And again, if we're going to have government K through 12, then why not government 13 to 16? I think the good thing about that kind of university system is that it can eliminate some of the people going to college who shouldn't go to college. Because entry into those universities, into government, into free government, tuition-free government universities is screened based on academic qualification, although I have not reviewed the numbers on this.

So I'm making an opinion that's unsupported by data here. I'm expressing an observation or an opinion that's unsupported by data. I think that means that there's more of a likelihood of the people being in those university classes who should be there. One of the biggest problems of the American college system has been the, because of all the free money, there have been schools that have dramatically lowered entrance requirements and basically let anybody in.

And those are the people who've been the most hurt by it. They're encouraged to go to college. They can't get into a good college, and so they wind up going to a next door college that has high tuition. They borrow money for it. They get two years into college.

They can't hack it. They can't cut it for the reasons I talked about in an episode a couple months ago of who should go to college. They can't cut it. They're not smart enough. They don't read well enough. It just doesn't click with them. They're not good at sitting in classes and producing what the teachers want.

They discover it's not for them. They leave without a college degree but heavily saddled in debt. Those are the people who have been very deeply hurt by the current system in the United States. So if you change that system and you eliminate the tuition requirements, at least for government universities, and you screen people based upon academic qualifications, then the people who get in are likely to be suited for the academic life.

They're likely to be more successful in it. And then if they're not and they drop out two years later, at least they're not harmed so substantially by it. They had to pass the rigorous academic entry exams and then they're not harmed by it. So I hope that that just caused you to think.

Again, who knows where we wind up? I don't know. But again, I see this as a dramatic philosophical discontinuity. And I think that human beings, being their core logical beings, who are able to understand and see logic, I think that if there's a discontinuity, eventually people will go to their actual beliefs.

They'll wind up there. And so to me it just hasn't made sense for years why there should be a fundamental distinction between government schools for K-12 and government schools for 13-16. There's ample precedent from countries all around the world, where even very high levels of education... I worked with a doctor from Mexico one time who was providing some eye care for me.

And this doctor, she said, she told me she had $50 a semester cost to go to medical school in Mexico. And so there's precedent all around the world for even the highest levels of universities to be tuition free. But that doesn't exist in the United States. And since I don't expect there to be any kind of dramatic move, at least not now, not for a long time, I don't expect there to be a dramatic move of people saying, "Let's get rid of government schools," then I think it's more likely we go in this direction.

So time will tell. In the meantime, what do you do? At its core, even though you feel like a chump, I think try to take... if you paid your loans, try to appreciate the fact that you proved to yourself that you were the kind of person who could borrow money and repay it successfully.

That shows the kind of person you are, and appreciate that. If you are having some of your debts relieved and having some of your student loans reduced, good for you. Take the money and go and use it to increase your family stability, invest it in your community, do something with it.

That's wonderful. I'm grateful for your good fortune. But in the future, both of those people, both of you, whichever one of those you are, you need to still continue to plan, because things are going to change rapidly in the coming decades. And at its core, the character qualities and virtues of being self-reliant, caring for yourself, planning ahead, of being prudent, those are the things that truly will ultimately pay off.

And you want to develop those character qualities. Otherwise, you're at the mercy of a broken political system. So that's what you need to know about the current wave of legislation, the current news. Hope that's helpful for you, and I'll be back with you very soon. The holidays start here at Ralph's with a variety of options to celebrate traditions old and new.

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