A Third-Party Policy Agenda to Make Americans Financially Secure Again

A blueprint of policies that would reduce student debt, expand health insurance coverage, help people to save for retirement and restore solvency to the Social Security system.

Introduction:

Despite relatively robust economic growth for the last 15 years, more and more American households are falling behind financially, having trouble paying off student debt in a timely manner, struggling to maintain insurance coverage, pay out-of-pocket health costs, and save for retirement. Neither the Republican nor Democrat party appear to have viable solutions to these problems.

The modern Republican party appears entirely focused on tax cuts, primarily for the wealthy and has no real ideas or interest in resolving financial problems impacting American households.

The Biden/Harris wing of the party appears more interested in mollifying the progressive wing of the party than in crafting cost-efficient practical solutions.

Major problems impacting the financial health of American households are not being addressed in the current political environment.

· Several Biden Administration student debt programs have been overturned or delayed by the courts. The incoming Trump Administration will roll back existing student debt programs.

· The Biden Administration did not prioritize major expansions of the ACA. The progressive wing of the party remains committed to Medicare-for-All even though this proposal is economically and politically impractical.

· Most retirees are highly dependent on Social Security, a system that cannot maintain current benefits past 2035. Issues related to the solvency of the Trust fund were barely discussed during the 2024 campaign.

· Student debt and medical debt are preventing younger workers from saving for retirement making it hard to justify modifications to the retirement age, even in the distant future.

· Recent efforts to expand use of 401(k) plans, do more to benefit Wall Street firms than assist households attempting to save for retirement.

The two-party system is incapable of providing solutions to these problems. This memo describes current Democrat and Republican positions on financial issues and proposes viable third-party alternative policies.

Student Debt:

Background:

The Republican and Democrat party have drastically different views on existing programs and proposals on the reduction of student debt burdens.

Most Republicans in Congress and the incoming Trump Administration do not support existing programs offering student debt relief or expansion of these programs. The primary concern of the Republican party appears to be reduction of tax burdens.

Student debt collection efforts, which were halted since COVID, will soon restart.

The incoming Trump Administration will halt pending Biden Administration student debt initiatives, will attempt to reverse the newly enacted SAVE loans, and may seek the repeal of the PSLF program.

The Biden Administration had aggressively moved forward on assuring eligible students received timely discharges under the IDR or PSLF programs. The Biden Administration has also moved to discharge loans for students that were defrauded by some non-profit schools

More generous Biden Administration efforts to expand loan discharge efforts were overturned or have been delayed by the courts. The Supreme court overturned a Biden program which could have cancelled up to $20,000 in debt for student borrowers in response to a national emergency. A second effort to provide more debt relief through executive orders has been delayed by the courts and will be cancelled by the incoming Trump Administration.

The progressive wing of the party is seeking even more expansive loan discharge programs. For example, Senator Sanders has a proposal that would forgive all student debt and Elizabeth Warren has a proposal for eliminating most student debt held by all households making less than $250,000 per year.

Many of the people who would receive student debt relief under the Sanders and Warren proposals are currently able to afford their student debt payments.

Candidate Biden’s initial 2020 position on student debt was relatively modest. His general election positionand the Administration’s recent proposals, which as noted have been overturned or stalled by the courts, may be efforts to unify the party, not serious efforts to reduce student debt burdens. Part of me believes that given Biden’s initial 2020 campaign position on student debt relief, the administration was happy their more ambitious programs were blocked by the court.

The third party recognizes the need to assist overextended student borrowers who are unable to service their student debts, because many young adults with high student debt burdens are unable to save for emergencies, a home, and retirement. However, the existing patchwork system of IDR and conventional loans is not economically efficient and often fails to provide the necessary economic relief.

The alternative program considered here better serves both taxpayers and student borrowers.

Key Features of the Third Party Student Loan Program:

· Zero interest on all conventional student loans during the first three years of loan repayment.

· Eliminate the deductibility of interest on student loans.

· Mandate a small but non-zero monthly payment on IDR loans and conventional loans in deferment.

· Delay entry into IDR loan programs until completion of three years of conventional payments.

· Modify IDR loan discharge provisions by allowing for partial discharges of IDR loans after three or four years of payments.

· Convert IDR loans to zero-interest conventional loans 12 years after initial loan repayments.

· Impose tax penalties on student borrowers not making minimum payments on zero-interest loans.

· Discharge remaining student debt 25 years after initiation of repayment.

· Subject final discharge on IDR loan to federal income tax.

Analysis: