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Another solution to our student loan debt problem?
Aug 24, 2022
Episode 738

Another solution to our student loan debt problem?

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We see you, Larry Summers.

It’s happening! After months of debate, President Joe Biden is canceling up to $20,000 in student loan debt. One listener wants to know whether the bankruptcy system can offer an alternative solution to the student loan debt crisis. We’ll help break it down. Plus, more of your questions about how congressional staffers get paid, congestion at our ports and hard seltzer.

Here’s everything we talked about today:

Have more questions for our hosts? Email us at makemesmart@marketplace.org, or leave a voice message at 508-U-B-SMART. 

Make Me Smart August 24, 2022 transcript

 

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

 

Kai Ryssdal: You’re like four seconds late, pal. I don’t want to hear another word out of you. Hey everybody, welcome back to Make Me Smart, where we make today make sense. I’m Kai Ryssdal.

 

Kimberly Adams: And I’m Kimberly Adams, thank you for joining us for Whaddya Wanna Know Wednesday, the day in the week where we answer listener questions.

 

Kai Ryssdal: So if you’ve got one – a question that is – about the economy or business or technology, email us at makemesmart@marketplace.org or leave us a voicemail, our phone number is 508-U-B-SMART. That’s the letter U, the letter B, thank you Amy Scott, you be smart. And today by the way, we’re going to lead with a newsie kind of question about President Biden’s decision to cancel some student debt in this economy. And we’re gonna go straight to that first question.

 

Beth: Hey, Make Me Smart. My name is Beth, I’m calling from Toledo. Why aren’t we using the bankruptcy system to determine who can discharge their student loans? It’s got means testing. It’s got reviews of the financial situations of the individual and can resolve everything on a case-by-case basis. Make me smart. Thanks guys. Love the show.

 

Kimberly Adams: I mean, the cynical answer is that it’s just too much money. And –

 

Kai Ryssdal: Trillions of dollars.

 

Kimberly Adams: Trillions of dollars and the relevant industries and lenders involved probably will do anything in their power to stop that from happening. But actually, there are a lot of people who’ve talked about this idea of using bankruptcy process to get rid of student loan debt, including Larry Summers, who tweeted about this on Tuesday. Problem is, it’s really hard to do that. Under the current system, student loan debt is basically not allowed to be discharged in normal bankruptcy proceedings. So in bankruptcy, you, you basically tell the courts, look, I can’t pay my bills, you gotta help me out. And some of the debt gets, you know, discharged altogether, especially after a certain period of time. Other debt, you get to renegotiate or whatever, it depends on the type of bankruptcy. Student loan debt, you can’t do that. And there’s a super high bar that you would have to meet to be able to do it. And it’s called undue hardship, which doesn’t apply to other forms of consumer debt. And so you’re still obligated to pay your educational debt even if you file bankruptcy. There’s a lot of conflicting views on this. Some people are saying, yeah, we should do it, because, you know, as we just heard, it’s got means testing. And Beth had a really good point, this is really robust a system in place for it. Um, but on the other hand, there are a lot of people who file for bankruptcy when they can pay their bills and use it as a mechanism. And there’s a lot of concerns that that’s what would happen at scale. I mean, you only have to look at the former president’s use of the bankruptcy systems to see that that has some potential for abuse. But a lot of people feel that those fears are overblown, and that it really would help out a lot of people in need.

 

Kai Ryssdal: Yeah, that’s exactly right. I got nothing to add.

 

Kimberly Adams: Yeah. All right then. Next question comes from Bill who wants to know, will congestion at US ports be worse than last year? Should individuals start placing their orders now for holiday gifts? You’ve had your eagle eye on this one.

 

Kai Ryssdal: I did. So the short answer is – let me take the second part of that question first, and the answer is yes, you should, just because you never know. And while it is less bad now than it was last year at this time, my money would be that there will be some holiday gifts that will be delayed. So order now. Order often. Is it going to be worse than last year? No. It’s already started to ease, and let me just give you a number. This past January, we had – at the ports of Los Angeles and Long Beach through, which come 40% of all containerized cargo into this entire economy. We had 109 ships stacked up and waiting out there. Now it is in the mid 20s as of like a week ago. So it’s really, really down a lot. That’s the sort of structural backlog. But there’s some other things going on, right. There’s a strike negotiation, labor negotiations going on here on the West Coast ports. A lot of companies have been rerouting shipments to East Coast parts, which is causing a traffic jam there. The short answer is that the supply chain is still not great. It’s way better than it was. But it’s still, you know, a little dicey. So, you know, buy early for the holidays. Don’t expect everything to show up next day. And, you know, we got to wait it out. There’s no other answer.

 

Kimberly Adams: I was hanging out at the hotel bar last night and sat next to a woman who had just been on a tour of the Port of Long Beach. And she was talking about how like, astonishing the automation there is, and how there’s just like so few people moving these giant containers around. And I wonder what all of this backlog, all of these supply chain problems have done for like the push to even further automate those systems. And, you know, somebody – I think it was Megan, who did a story about how the Longshoremen negotiated their union contracts that when they were going to have fewer workers, they’d get trained on how to use the new systems as part of their older contracts. But like how few people can you have, you know, okay.

 

Kai Ryssdal: There’s that joke about the last factory in the United States. Have you heard that one?

Kimberly Adams: I’m guessing it’s like… No.

 

Kai Ryssdal: Oh, man. So, so the last factory in the United States has two beings working at it. One is a man or a person, and one is a dog. The person is there to feed the dog, and the dog is there to make sure that the person doesn’t touch any of the equipment.

 

Kimberly Adams: That’s a good joke. That’s a good joke.

 

Kai Ryssdal: All right. So we’re going to talk money and politics and elections. With us, next one.

 

Ted: Hi, this is Ted in Columbia, Missouri, halfway between St. Louis and Kansas City, home of the Mizzou tigers. Question: I was just listening that Liz Cheney lost her election bid or her primary bid. Wyoming only has one representative. And she has staff in Washington, DC. And she has probably staff in Wyoming. Who pays for that? And how does all that money get raised? Is it through fundraising? This is a big rabbit hole. I would appreciate a little bit more clarity on this. Thank you very much. Thanks for making us smart. Bye.

 

Kimberly Adams: Well, thank you Ted, and cheer on the Tigers for me. As I’ve mentioned, perhaps more than once on this podcast, I went to the zoo. But it’s a, it’s a good question. And the answer is we pay for it and other people pay for it. So everyone, everyone. All right. Because Liz Cheney was running for office, she actually has two different sets of staff, like most members of Congress, they have their campaign staff and – politicians in general, they have their campaign staff, and then they have their working staff. Their congressional staff, including like the Chief of Staff, the legislative director, the press secretary, and the people who work in the various district offices, because usually, members of Congress have a couple of different offices within their state, because their districts are so large. And those staffers are indeed paid by the federal government. Their salary comes from a budget that Cheney gets to run her office. And that budget is determined by things like the cost of living in the district, how big the district is, how far the district is from DC, and like travel costs and things like that, price of real estate. And so everybody gets a budget for their staff. However, those budgets don’t necessarily go as far as people would like them to go. Like having lived in DC, you have a lot of especially junior members of congressional staffs living in like basements and group houses and it’s really rough. And so there’s been a big push for people to get better pay as congressional staffers, and some of them are trying to unionize or in the process of unionizing in some cases. So that’s the congressional staff, right. The other staff is the campaign staff. And that’s the staff that gets paid by sort of this – what we talk about more and more, we’re talking about money in politics, the big donors, the PACs, the small donors, her own money if she chooses to use it, loans that she might take out. All of that money can go into the campaign to pay for those wonderfully highly paid consultants in Washington and elsewhere. So there you go. Good question.

 

Kai Ryssdal: That’s a really good question. Because it’s a big deal.

 

Kimberly Adams: Yeah. Okay, our next question comes from Becca in Connecticut. She says, please make me smart about the supposed “hard seltzer bubble”. Y’all mentioned it in passing this Friday.

 

Kai Ryssdal: Yes, the best part of the hard seltzer bubble is that it’s almost over, and I say that as a guy who, you know, prefers big chewy beers as opposed to light frothy little seltzer things. Um, so here’s the deal. It started, I don’t know, like four maybe five years ago, you had White Claw and a bunch of others, which were alcoholic seltzer waters, usually like 5% ABV. They sort of appealed to health conscious people, people looking for something lighter than beer or actual booze. And now though, the fizz has gone out, shall we say. According to one analysis, I saw this in the Wall Street Journal, thank you Ms. Cabrera. Hard seltzer sales at the retail level down 18% year on year for the month of June. The company truly expects volumes to fall 20% this year. Sam Adams, which brews Sam Adams beer, also has a hard seltzer division, which had to write down at least tens, probably hundreds of millions of dollars worth of value because it’s not selling. Theories vary. The markets become crowded, it’s no longer new. People are going back to lighter beers. It’s, you know, the fish is gone. as I said.

 

Kimberly Adams: I really got into the hard seltzer thing…

 

Kai Ryssdal: You know who really liked it, though? My nieces and nephews. I mean, well, they’re like, twenty-four, five, six.

 

Kimberly Adams: I mean but that’s the demographic right? That’s exactly who was drinking it. And now I guess they’re being even more health conscious and not drinking as much? I don’t know. I mean, my issue with them was that they were usually like vodka or gin based. And I don’t like – well, you know, gin is the devil. I don’t mess with gin.

 

Kai Ryssdal: Was that right?

 

Kimberly Adams: Oh god, no.

 

Kai Ryssdal: Bad experience?

 

Kimberly Adams: I’ll tell you that story off of a microphone. But yes, so. But they’re vodka or gin based and I’m generally if I’m making something with fizzing, and I want like a brown liquor, you know? And not necessarily a vodka or something. Anyway, save that for Friday. Okay, final question of the day from Amy in New York. I remember in the early days, I always bought my phone or usually got it free. And then everything became a lease. Now I’m due for an upgrade. And there are no more leases, only options to buy. Can you make me smart about this industry shift?

 

Kai Ryssdal: Yeah, you go, you take this one. Holy cow.

 

Kimberly Adams: Well, okay. So as somebody – I should say, full disclosure, I don’t buy new phones, and I have not bought a new phone in probably like five years. I buy refurbished old model phones and buy them outright because I’m a klutz. And I know I’m going to break it. And it’s just not going to be worth it. But there has indeed been a shift in how the cell phone plans work. So back in the days of those two-year contracts that would come with a free phone. Yeah, those are mostly gone. That’s because carriers at the time were basically subsidizing phones in exchange for that multi-year contract. Remember how impossible those were to get out of? Or they were adding kind of hidden fees in that for that phone in your contract. And eventually companies stopped doing that. And that’s when you really saw the price of cell phones shoot up, because they weren’t being bought in bulk by like Verizon, and AT&T, you were buying it yourself. And maybe you could get a discount on it when you signed up for a plan or something like that. But to spread out the cost of these super expensive phones that are, what, like a grand now or something like that? Yeah, they give you the option to pay for installments and basically bundle that into your monthly bill. So a huge chunk of people’s phone bills now is, you know, your payment on your phone. There are still a few options out there to lease your phone. But the downside is that if you don’t own your phone at the end of the lease, and given how expensive phones are you might not, you have to pay a buyout if you want to keep it or to get a new lease or buy a new phone and then they’re like, oh, but if you want to renew your lease, you can get a free upgrade and get you caught. Anyway, as far as Marissa’s research, T-Mobile seems to be the only major carrier to still offer a lease option. And mostly people are giving just discounts to folks trading in old devices, but let me tell you, refurbished devices, way to go.

 

Kai Ryssdal: Yeah, I was just gonna say it’s really smart, actually.

 

Kimberly Adams: I mean, like, they come with the same warranty usually, and you can get a couple 100 bucks off of the phones, and if you drop it, you feel a little bit less badly.

 

Kai Ryssdal: Yeah. No, that’s super smart. Super smart. Alright, that’s it for us for today on this Wednesday. Thanks for listening. Back tomorrow with the news and some smiles as well.

 

Kimberly Adams: Indeed, indeed. In the meantime, keep sending us your questions, our email is makemesmart@marketplace.org. Or you can leave us a voicemail at 508-U-B-SMART.

 

Kai Ryssdal: Make me smart is produced by Marissa Cabrera. Olivia Zhao is our intern. Ellen Rolfes writes our newsletters.

 

Kimberly Adams: Today’s show was engineered by Charlton Thorp. Ben Tolliday and Daniel Ramirez composed our theme music and our senior producer is Bridget Bodnar.

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The team

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