The best parts of the Inflation Reduction Act and student loan forgiveness aren’t the obvious ones

The Biden Administration keeps burying the lede

click to enlarge Simple policy makes for better politics. - Shutterstock
Shutterstock
Simple policy makes for better politics.

The Biden administration’s got its mojo back just in time for the fall midterms. That new momentum is, in part, thanks to two key pieces of policy: the Inflation Reduction Act and Biden’s student loan forgiveness plan.

Though one is a major legislative accomplishment and the other a smart bureaucratic change, both have something in common: their most important parts weren’t their shiniest.

Let’s start with the Inflation Reduction Act’s much heralded price negotiation for prescription drugs. Prescription drug negotiation has grabbed many headlines — finally ending a long-held restriction on Medicare’s ability to advocate for its patients. Though, considering that negotiation doesn’t actually start until 2026 and that it only applies to, at most, 20 drugs, it’s the thinnest possible negotiation they could have gotten. And so, the most important aspect of the prescription drug reform isn’t drug negotiation at all. It’s something buried deep beneath the headlines: the Inflation Reduction Act limits the annual increase of drug prices to the rate of inflation for Medicare beneficiaries!

Over time, this component — not Medicare negotiation itself — is where the real savings for patients will accrue. Every year, pharmaceutical companies and their CEOs, whose profits are held in stocks, raise their prices to arbitrarily bump their projected earnings. Prices of half of the prescription drugs covered by Medicare increased faster than inflation in 2020. Price negotiation only benefits folks who are taking one of 20 drugs to which it applies. But limiting annual price increases across the board benefits far more people. The Biden administration buried the lede!

They did the same with student loan forgiveness announced last week. Ostensibly, this action is about forgiving up to $20,000 of debt for borrowers earning less than $125,000 annually. But like the Inflation Reduction Act, again, the most important aspect of the policy isn’t in the headlines.

The most revolutionary component of Biden’s student loan forgiveness is a rule change at the Department of Education with respect to the income-driven repayment plan. The rule both reduces the maximum discretionary income a borrower can be asked to pay, and alters the way that discretionary income is calculated. Rather than 150% of poverty, the new rule would calculate non discretionary income at 225% of poverty.

To understand the impact, consider a hypothetical borrower in Michigan who graduated with $25,000 in student loan debt.

She lives alone and now makes $50,000 per annum. Her loan is accruing interest at 5% per year. Assuming she has $10,000 of her loan forgiven, she now owes $15,000. But that loan accrues interest at $2.05 a day — $60 a month.

The federal poverty level in Michigan for a person living alone is $17,388. Under the old income-driven repayment plan, she would be expected to pay up to $200 a month. Under the new rule, that drops to $45 a month. But if the loan is accruing more than $2.00 a day in interest, that means her monthly payment wouldn’t even cover the interest. Under the old rule, her interest would simply balloon her overall debt. But under the new rule, her excess interest is paid for by the federal government!

What’s more, if she makes her payments, her slate is wiped clean after 10 years, rather than 20 under the old system. If she were to stay in her job for the next decade (admittedly unlikely), she’d end up paying about $5,400 and the government would wipe out the remaining $9,600 of her debt.

In total, that would mean she paid only only $5,4000 to pay off her entire $25,000 debt. This rule, combined with Biden’s initial $10,000 forgiveness, eliminates nearly 80% of her burden. But just like the prescription drug reform, the Biden administration buried this lede.

Though I’d love to see more people talk about these revolutionary changes, my takeaway here is not that Biden is wrong to bury the lede — in fact, I applaud them for how they’ve messaged these policies. There’s a lot their strategy can teach us about the space where advocacy, policy, and legislation meet.

Policy is necessarily tedious. Good policy, after all, accounts for all of its consequences, intended and perhaps more importantly, unintended. In that respect, it can be hard to explain — even harder to advocate for in an increasingly attention-limited news environment like the one we live in today. #CancelDebt is easier to advocate for than #RecalculateNonDiscretionaryIncomeToReformIncomeDrivenRepayment. But as progressives, we want both. That behooves us to be better explainers of our policy goals, not just advocates for it.

There’s another side of this: simple policy makes for better politics. Policy wonks love to design nuanced policies to be all things to all people. They nip and tuck, poke and prod until the Frankenstein they create is inexplicable to the public. The policy graveyard is full of such policies — Bill Clinton’s health reform plan comes to mind. But even when it passes, it’s hard for most people to connect windfalls in their lives to the policies that created them … if they don’t know that the policy even did it.

Toward that end, the Biden administration may have had their cake and ate it too. They attached a limited, easily messaged version of the most simple goals — drug price negotiation and canceling student debt — to far more complex policies with a lot more bite. Kudos.

But real policy nirvana happens when the whole policy is its own message. What you see is what you get — and what you get is what you see. That requires you to take the political risk to go big, but to reap the political rewards when folks understand exactly how the policy benefits them. Medicare for All, anyone?

Originally published Sept. 1 in The Incision. Get more at abdulelsayed.substack.com.

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About The Author

Abdul El-Sayed

Dr. Abdul El-Sayed is a physician, epidemiologist, public health expert, and progressive activist who served as Detroit’s health director and ran for governor in 2018. He is the author of Healing Politics: A Doctor's Journey Into the Heart of Our Political Epidemic and Medicare for All: A Citizen's Guide, as well...
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