Unsanitized: The COVID-19 Report for July 29, 2020

The Student Loan Hustle Inside the HEALS Act
This is an example of why that bill should be made inactive

 

Proposed student debt reform is inequitable and coming at the worst
possible time, advocates say. (Jon Elswick/AP Photo)

First Response

As an anxious nation waits for news from Washington, they might want to
avert their eyes. The Senate Republican bill, the HEALS Act
,
came in way too hot and crashed within 24 hours. Cutting back the $600
unemployment boost put the party at odds with swing state voters
.
Inanities like the $2 billion to move FBI headquarters were so toxic
that Mitch McConnell came out against it
, even
though it was in the bill he designed.

The provision designed to cut Social Security and Medicare

drew a rebuke from AARP
,
which typically goes all in on nominally bipartisan solutions of this
nature. There are $8 billion straight-up for weapons systems

in the bill, and much of the Defense Department piece effectively
restores the money diverted

by Donald Trump to pay for his border wall. That was kind of an
existential crisis for the legislative branch, a usurpation of their
power to control federal spending, and Richard Shelby is just acting
like it never happened.

McConnell's terrible bill seems to have squeezed him and his caucus
completely out of the negotiations on the package, which are apparently
being waged between the White House and the Democratic leadership
. But he's
still demanding full corporate liability-including a piece that could
effectively end all medical malpractice suits for five years-as a red
line.

Notice that funding for big business is not part of this package at all.
That's because they got their fill in the CARES Act, $4.5 trillion
worth in a Federal Reserve money cannon. It's nice when you get relief
all at once and don't have to beg for more, like mass transit
authorities are doing

right now, for example.

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As negotiations roll on, Democrats must not lose sight of the overlooked
pieces of the HEALS Act that could get grandfathered in. Because it's
such a big bill, this level of attention is important. McConnell has
disqualified the HEALS Act from being the baseline. That should nullify
all of his provisions. One big one is student loans.

The student loan cliff doesn't hit until September, when the pause on
payments expires. The question is what to do after that. Sen. Lamar
Alexander (R-TN), who is retiring and wants education to be his legacy,
has proposed a complete overhaul of the federal student loan payment
system, using the pandemic to implement a pretty radical change. This
plan made its way into the HEALS Act.

His proposal

would shift to a full income-based repayment system, where borrowers
would pay 10 percent of their income, excluding housing and food. Loan
balances would be forgiven after 20 years of these payments for
undergraduate loans, and 25 years for graduate loans. If you have no
income, you don't pay; ten percent of nothing is nothing.

What might have been seen as a left-leaning policy ten years ago is now
to the right of arguments to cancel student debt. The Alexander plan
would "offer little in the way of direct relief for Americans facing
the most pressing financial distress," according to a letter from
dozens of progressive groups
.

The income-based repayment option in the bill already exists for most
borrowers; Alexander really just narrows repayment options to that, and
extends the payment period for grad student borrowers from 20 to 25
years. Resetting to one repayment plan restarts the clock on things like
Public Service Loan Forgiveness, which should move to forgiveness within
10 years.

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Importantly, the repayment as a percentage of income will apparently be
based on 2019 tax returns, which is irrelevant in 2020, with millions
out of work. People could presumably get that changed, but it would
require navigating the thicket of private student loan servicers, which
are notoriously unreliable and hard to reach.

The plan could also force student borrowers to actually pay more than
they would owe in a standard repayment that pays off in twenty years,
depending on their income (other plans cap repayment at the standard
rate). The phase-outs are set differently, which would force some
borrowers to pay who aren't paying now. Finally, the Alexander plan
would restart repayment in October, when we're still likely to be in
the middle of the pandemic, even for the 9 million who are in default.

Borrower advocates have blasted the proposal
.
"This is an insult to millions who have been struggling to navigate a
collapsing economy and a pandemic made worse at every turn by the
government's incompetence and neglect," said Mike Pierce, policy
director for the Student Borrower Protection Center, in a statement.
"This moment demands a response at the scale of the enormous
challenges facing borrowers and the economy. This is certainly not
it."

Without throwing out McConnell's weak gambit entirely, the risk is
that elements like Alexander's plan remains in the base bill, only to
be modified rather than torched. McConnell's failure should have
consequences. His bill, and everything about it, should be set aside.

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Odds and Sods

The most important hearings about corporate power in generations are
happening today in the House Antitrust Subcommittee, as the CEOs of
Apple, Amazon, Google, and Facebook testify. I'll be monitoring it at
my Twitter feed and will have coverage in
the Prospect tomorrow.

Tonight at 7:30pm PT I'm appearing at Town Hall
,
a great venue in Seattle, to talk about my book Monopolized
. You can
register for that event and support an incredible venue space here
.

I have a piece at the site today

about credit reporting. The crisis is wreaking havoc on credit scores as
people miss payments. Those negative credit items stick with you for
seven years, and it's not an accurate measure of creditworthiness
outside a pandemic disaster. So consumer advocates want to temporarily
ban negative credit items during the crisis. Big banks want none of
that; they can't raise the cost of credit unless they get those
negative items. So they've employed Pat Toomey, a willing stooge to
banking interests, to block the effort. You can read about that here
.

Also today we have Sonya Michel, a longtime expert on childcare, with a
fascinating history

of how we got our fragile childcare system, and how it broke in the
pandemic.

You can find all of our coronavirus coverage at prospect.org/coronavirus
. And reach out to me via email
with tips, comments, and perspectives.

Days Without a Bailout Oversight Chair

124
.

We Can't Do This Without You

Today I Learned

* The president is a superspreader of misinformation
.
(New York Times)

* California is considering its own weekly $600 unemployment boost
,
I don't see where they get the money for it though. (Los Angeles
Times)

* The little-known SBA disaster loan program (not the PPP) is rife with
fraud
.
(Washington Post)

* Teachers union says they'll strike

if teachers are asked back to work without safety protections. (The
Hill)

* As expected, restaurant sales are hitting the wall
.
(CNBC)

* The best response to the opioid crisis has been damaged by the
pandemic
.
(New Republic)

* A bunch of anesthesiologist residents at the University of Florida
held a party, and now they all have coronavirus
.
(Miami Herald)

* American Airlines flights are slow, so the company that sold them
their premium mixed nuts have a ton of unused packets, and they're
selling them
.
(Wall Street Journal)

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