Letter to the President on Student Debt and Social Security levels

This continues our correspondence on student loan debt and health care reform.

Using student debt holders as funders to offset the cost of health care reform must end. The most abusive practice in the fleecing of the borrowers is the offer to capitalize (rather than to forgive) interest during a period of deferral or forbearance. 

This one provision, along with the inability to discharge this debt in bankruptcy, has a great many people in my age cohort fearing retirement with a student loan balance that will lead to diminished Social Security retirement payments, the size of which are already inadequate. Because I am disabled, my student loans have been discharged. For many others, this is not the case.

The solution to student loan forgiveness is not the amount, it is correcting current abuses. The logic of maintaining non-dischargeability in bankruptcy follows from not discharging tax debt. This leaves one obvious reform, end the practice of capitalizing interest - defer it instead. When interest has been capitalized, reduce the current balanced owed by that much. For many, if not most borrowers, this should end the obligation to repay any further debt.

The remaining question is whether the remaining overage should be refunded, or rather, can it be refunded. 

Debt forgiveness is possible by simply changing deferment rules and making them retroactive. This will require changes in law, but not any expenditure of funds to then forgive the debt.

Providing cash refunds to borrowers, while just, could never be passed. Propose it, but trade it away to secure passage.

This leaves the question of the adequacy of Social Security Retirement, 

Ideally, employer contributions would be credited on an equal-dollar basis. This solves the problem of low-income elderly and reduces the problem of high-income benefits (a lower cap on employee contributions would lower amounts still. Funding employer contributions with a value added, rather than a payroll tax, would end the capping of these contributions, thus allowing a tax rate adequate to avoid eating canned tuna at the end of the month (or cat food). This would be done inside of larger tax reform.

You have proposed an increase of the minimum wage to $15 per hour. I advise, for the moment, settling on $12 to get bipartisan buy-in, with a long term goal of $21, with automatic indexing for inflation.

Whatever amount is enacted must be used to rebase contributions for current retirees, treating the increase in payment levels as inflation.  This would win over the retired community, including Republicans, to support both a higher minimum wage and tax reform. More importantly, no cat food at the end of the month.