🎓 Student loan forgiveness…?

Biden’s big student loan forgiveness plan: will it happen?

Can you please forgive me?… Not a text from your ex. During his campaign, President Biden (whoa) suggested he would support $10K of broad student loan forgiveness. Wild stat: about ~42M Americans (1 in 8) hold $1.5T worth of student loans combined. Also: Black and Hispanic borrowers are much more likely than white borrowers to be behind on their loan repayment, exacerbating the racial wealth gap. In his campaign plan, Biden proposed a few ways to ease the big debt burden:

• Offer $10K of federal student debt relief for every year of national or community service someone performs (for up to five years). Think: public school teachers, police officers, and Peace Corps.
• Give a free pass to people making $25K or less per year (no loan or interest payments required). Also: make public college tuition-free for families making under $125K.
• Forgive federal loans after 20 years for everyone else who has responsibly made payments, and significantly reduce the overall payment.

But will it happen?… Biden has already said he’s “unlikely” to forgive $50K of student loan debt, which progressive Democrats (like Sen. Elizabeth Warren) are pressuring him to do. $50K sounds fantastic, but nearly 70% of Warren’s proposed benefit would go to the top 40% of households (higher earners hold most of the student debt). As for Biden’s $10K eraser and the other relief, there are three reasons it doesn’t seem likely to happen in the near future:

1. Biden isn’t doing this via executive order: Instead, his admin signaled they’ll go through Congress, which will be a lengthier, more complex process.

2. It’s not in the stimulus proposal: Biden’s massive $1.9T proposal covers a lot — but not student debt.

3. Biden just extended student loan payment deferrals: Last year, Congress suspended payments and waived interest from March to September. Then, Trump extended that to January 2021. Now, Biden has extended deferrals to October 2021. But some see it as an either/or situation.

Biden chose the least costly option… to achieve the same effect (for now). The eight-month deferral of student loan payments stimulates the pandemic economy similarly to how lowering/canceling payments would: in both cases, you’re not required to pay during the pandemic — which (in theory) means you have more $$ in a tough economy. Meanwhile, this deferral scenario doesn’t bloat the (already huge) national debt. If Biden does go for loan forgiveness, he’ll likely target households that need it most.

Netflix shares jump the most in four years — investors are feeling (cash flow) positive

Tiger King’s Gambit… Netflix stock soared 17% yesterday, its biggest one-day gain in four years — oh, and it also hit an all-time high. Netflix’s latest quarterly earnings made investors hot and streamy. Some numbers:

• 200M+: Netflix’s paid subscriber count, double from 2017.
• 100M households have watched The Crown to date, and 62M watched The Queen’s Gambit in its first 28 days (Netflix thrives on shows with royal titles).

Rolling with the (cash) flow… Netflix’s quarterly sales growth has been slowing — and its quarterly profit actually fell compared to a year earlier. But analysts got all giddy over one thing: cash flow. The Flix said it expects to become sustainably cash flow positive after 2021.

• Cash flow positive = having more money coming in than going out over a given time period. If you made $3K from your job this month, but spent $2K, you’re cash flow positive (#ey).
• Netflix has been paying for its operations (like the outfits in Bridgerton) by borrowing and raising money. Now it has enough cash on hand — $8.2B — that it doesn’t need to raise more.
• BTW: Netflix is profitable, but it’s possible for a company to be cash flow positive and not profitable. Big loans can inflate cash flows but don’t directly boost profit.

It’s all about sharing the wealth… with shareholders. Companies that are cash flow positive are generally more likely to return cash to investors, either through dividends or through stock buybacks. As it approaches “being sustainably cash flow positive,” Netflix said it’ll explore more stock buybacks — which boost the price of shares by reducing their availability. But investors are also patient: it took Netflix 23 years to get to this point.