John Oliver warned voters not to place too much weight in Green Party presidential candidate Jill Stein’s plan to wipe out student debt for a whole generation. Oliver argued that she didn’t understand her own plan, but experts say her proposal would be unlikely to succeed for another reason.
On his HBO show “Last Week Tonight” on Sunday, Oliver played clips of Stein talking about her proposal.
“We’re the one party that’s actually calling for canceling student debt and bailing out a generation of young people like we bailed out the bankers on Wall Street. We can do that for this generation,” he shows Stein saying. She also says that the bankers got “$4 trillion in free money in the form of quantitative easing,” which she called “a magic trick.”
But Oliver poked holes in Stein’s proposal to use quantitative easing to cancel Americans’ student loans. Stein has repeatedly touted the proposal as one of the biggest differentiators between her and her opponents.
“While Jill Stein has said that the president has the authority to cancel student debt using quantitative easing, that is absolutely wrong,” Oliver told viewers. “The president does not have that authority. Only the Federal Reserve does and it does not take marching orders from the White House, because that would be extremely dangerous.”
The specifics of Stein’s plan are unclear, though she has said repeatedly that the president has the authority to cancel student debt using quantitative easing. Her campaign didn’t immediately respond to a request for comment. But it’s technically possible for the Fed to play a role in student debt forgiveness, experts say — though extremely politically challenging. And it isn’t done in the way Stein describes.
Quantitative easing, or the Fed’s plan to buy up securities to reduce interest rates in the wake of the financial crisis, is not the same as forgiving debt, said Scott Fullwiler, an economics professor at the University of Missouri Kansas City. Instead the Fed could acquire the nation’s $1.3 trillion in student debt — though it would be difficult given that the bulk of the debt is held by the Department of Education and not on the open market — and consider forgiving the debt or take over the payments for it.
In either case, the Fed would reduce its profits, which it’s required to send to the Treasury, Fullwiler said. That means the budget would be impacted by the Fed taking this step, so it would likely make more sense for the government to simply get rid of the debt directly, instead of relying on the Fed.
“There’s not a free lunch by having the Fed do it,” he said.
There are ways for the Fed to offset this loss, that are perhaps too complicated to get into here, but the Fed likely wouldn’t take those steps on its own, Fullwiler said; instead, Congress would have to write a law to force the central bank to do it.
In other words, it isn’t technically impossible for the Fed to play a role in relieving student debt as the Oliver clip implies, but it would be politically difficult, said Rohan Grey, the founder of the Modern Money Network, a nonprofit that aims to educate the public about money issues. But if a Green Party candidate actually made it to the presidency, that would signal a very different political environment than the one we’re currently living in.
“At the point that Jill Stein wins enough of the vote to become president, these kinds of things are not necessarily going to be outside of the feasible interpretations of law,” he said. Still, “to say ‘this is on the books — we can do it,’ is to miss the fact that this would require a very contentious struggle for power.”
Both mainstream political candidates have offered their own plans to curb the student debt crisis and though they’re less radical than what Stein is proposing, either candidate will likely still face some political obstacles to turning their plans into reality.
Republican candidate Donald Trump said last week that if elected, he would cap student loan payments at 12.5% of borrowers’ income and forgive the debt after 15 years — a repayment process that’s arguably more generous than what’s already available. He also said he would push Congress to limit tax privileges for university endowments at colleges that don’t make efforts to stop the growth in college tuition.
Hillary Clinton, the Democratic candidate, has been touting a college affordability plan for more than a year. If elected, Clinton said she would make college tuition free for students from families earning $125,000 or less largely through a partnership between states and the federal government. That proposal is part of a broader plan curb student debt, which includes allowing borrowers to refinance their student loans at lower interest rates and streamlining the current repayment system.
John Oliver says Jill Stein doesn’t understand her own student debt plan – MarketWatch