NerdWallet's Smart Money Podcast - How the Next President Could Shift Health Care Costs and Student Loans

Episode Date: October 24, 2024

Learn how the presidential candidates' policies on health care and student loans differ in how they could impact your finances. What impact could presidential policies have on health care and student loans? How might these policies affect your personal finances? Hosts Sean Pyles and Anna Helhoski discuss health care costs and student loan forgiveness to help you understand how upcoming elections may influence your financial future. They begin with a discussion of health care with Richard Frank, director of The Center on Health Policy, about the feasibility of lowering prescription drug prices, the candidates’ stances on Medicare and Medicaid, and the potential for health care tax credits to be extended.  Then, Anna talks to Student Loans Nerd Eliza Haverstock about student loan repayment policies and financial aid. They discuss the fate of income-driven repayment plans like SAVE, the future of public service loan forgiveness, and the costs of alternative education pathways for students beyond traditional four-year colleges. Stay up to date on the latest financial news by visiting NerdWallet’s Financial News Hub: https://www.nerdwallet.com/h/news/financial-news  In their conversation, the Nerds discuss: presidential policies, healthcare costs, lowering healthcare costs, healthcare tax credits, healthcare reform, Affordable Care Act, ACA, Kamala Harris healthcare plan, Donald Trump healthcare plan, student loans, student loan forgiveness, Medicare, Medicaid, SAVE repayment plan, public service loan forgiveness, PSLF, prescription drug prices, financial aid, college affordability, Pell Grant, alternative education pathways, election impact on finances, student debt relief, healthcare policy, college tuition costs, and healthcare in the US. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Think of your budget. The money you spend. The money you save. The money that creates dreams. The money that creates nightmares. The money you owe. The money that's owed to you. When you think about it, politicians have a lot of say over all of that. They have a lot of power to make policy around just about everything your money touches. Today, we're looking at two specific areas, healthcare and student loans. The fate of the repayment plan is now largely in the hands of the courts. However, the president can influence the situation by directing the Justice Department how to proceed with appeals. Harris would likely continue to vigorously defend the SAVE plan in court.

Meanwhile, Trump is not likely to defend SAVE. Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Hilhoski. And this is the final episode of our nerdy deep dive into presidential policy and personal finance. So far, we've talked about how much impact presidents really have on your personal finances and unpacked what the two presidential candidates are proposing around prices and taxes. I think it's safe to argue, Ana, that healthcare and education are two pretty important elements in our lives. One keeps you alive. The other can help you live your best life. Yeah, I think that's accurate, Sean. And in the United States, they're two of

our biggest budgetary outlays. As a country, we have some of the highest healthcare costs in the United States, they're two of our biggest budgetary outlays. As a country, we have some of the highest health care costs in the world. According to the World Economic Forum, the U.S. spends more on health care than any other country. At the micro level, the average American spent $12,318 on health care in 2021. In the next most expensive country, Germany, they spent $7,383 per capita. In Italy, $4,038. And despite spending more, we have less coverage and lower life expectancy. A survey earlier this year by the health policy research organization KFF found that about half of U.S. adults say it's difficult to afford health care costs. And one in four say they or a family member in their

household had problems paying for healthcare in the past 12 months. The rules of our healthcare system are designed, by and large, by legislation created by policymakers in Washington and in each state capitol. So, as we've been saying, elections matter. They do indeed. So first up today, we're going to look at what Kamala Harris and Donald Trump are proposing to do to ease the cost burden of healthcare in this country. After that, we'll hear about how they plan to tackle the student loan crisis that's an outgrowth of the high cost of secondary education in America. And as we've said throughout this series, we are not here to take sides or fan the flames of an already contentious political season.

Our goal here is the same goal we always have at NerdWallet, to help you, our listeners, make smart, informed decisions about the stuff that impacts your finances. Sometimes that means choosing the right credit card for your needs. Other times that means voting for the candidate who you believe will help you achieve your life and financial goals. And we want to hear what you think too, listeners. To share your thoughts around the election and your personal finances, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD or email avoicememo to podcast at nerdwallet.com. So Ana, we're starting with healthcare. We are. I've spoken to a few different healthcare policy experts, and they all said that the most viable proposal from either candidate is lowering prescription drug costs. I talked about that and some of the candidates' other promises with Richard Frank, Director of the Center on Health Policy.

Richard Frank, welcome to Smart Money. Thank you very much for having me. So let's start with a specific health care cost, prescription drug prices. Vice President Harris has said she wants to lower them. Can you talk a little bit about the feasibility of her plan and how it relates to what the current Biden administration has done on that front? Judging by a combination of what she's said and also some of the things she's done in the past, I would say there's kind of two lines of effort she might make in this area. The first is to expand on parts of the Inflation Reduction Act aimed to lower prices. And that in particular has to do with the negotiation. One of the things that she said is she wants to expand the number of

drugs that are negotiated each year. This is based on sort of the experience in the first year of the drug negotiation programs, which came in, in a number of cases, some pretty substantial discounts over current prices. The second piece has to do with her past efforts, particularly when she was the Attorney General in California, which is she's very interested in promoting competition. In the prescription drug area, there's two main areas where that could really improve matters. The first has to do with clearing out impediments to generic competition. There are a variety of regulatory and industry strategies that serve to kind of create frictions for generic drugs entering the market.

And what that does is it effectively extends the exclusivity period and keeps prices high for prescription drugs that have been on the market for quite a while. The second part of that, the second competition piece, has to do with biosimilars. Generic drugs apply mostly to what are known as small molecule drugs. Those are drugs that usually come in the form of pills that we've been taking for most of our lives. The other type of drug are biologic products. They are regulated differently. And the Affordable Care Act created a pathway for biosimilars to enter the market and compete that is kind of like what we do for generics, but not exactly. And the regulations have been very slow to develop, and they've been what turns out to be excessively cautious. And so what she might do is try to streamline the regulations and to use sort of pro-competitive policy to try to

reinvigorate the biosimilar market and create more competition for biological drugs that have been on the market for quite a while. Now, former President Trump hasn't specifically discussed prescription drug costs, but as president, he did support several measures in his first term, including capping insulin costs for certain Medicare recipients. And he issued an executive order to make it easier to import cheaper prescription drugs. But he also opposed letting Medicare negotiate drug prices for seniors. Has Trump given any indication of where he stands now on prescription drug costs? I think there has been some mention, both by him and Mr. Vance, about returning to the most favored nation policy, which is basing the U.S. drug prices

on the prices of prescription drugs in a country that has similar kinds of GDP wealth as the United States, but has the lowest drug prices of that group of countries that fit the economically similar category. And so I think that is being talked about on the Trump side of the campaign. Now, how about Medicare and Medicaid? Have the candidates said much on those fronts? The Trump folks have been saying that they aren't going to touch Medicare. Biden-Harris administration has taken a number of steps to, in a sense, try to reduce the amount of overpayments that are made to the Medicare Advantage program. Those are the main issues that have been pursued in addition to the drug pricing policy on the Medicare side.

Now, some economists are projecting insolvency sometime in the 2030s for these two programs, as well as Social Security. What's at stake in this election? Are we just kicking this can down the road? The Congress has a long and distinguished history of waiting till the 11th hour to deal with trust funds and their insolvency. This is true in the past. This was true most recently when there was threats to the disability trust fund within Social Security. And so I expect that might actually occur. But I think what's important to recognize here is that one thing that is front and center on the economic front of both parties is its size of the deficit and the debt. And it turns out that if you address Social Security trust fund solvency issue and the Medicare health insurance trust fund issue, and you make them,

say, solvent for 30 to 50 years, you've taken care of roughly two-thirds of the budget deficit problem. If you're interested in really addressing those in a serious way, the glide path is through Social Security and Medicare. Let's turn to the Affordable Care Act. During Trump's first term, he tried to repeal and replace, but was unsuccessful. During the debate, he says he has concepts of a plan. Does it seem like he'll try once again to replace it? There really is an absence of an alternative plan, for the most part, as there was in 2017 when he was trying to do it. I think the issue is that there are things that can be done to shrink the reach of the Affordable Care Act. And there are things that were done in the last Trump administration to try to make it more difficult to sustain the markets in the Affordable Care Act. Those have largely been restored through various bipartisan legislation over the last few years. Those markets are doing quite well. They're insuring more people than they ever have. And for the most part, they seem to be functioning reasonably well. I'm not sure how much appetite there is in either House of Congress to sort of try to

take that on and take on the messiness and complexities that may result. Under Biden, ACA's health care tax credits increased through the American Rescue Plan and the Inflation Reduction Act. Both are expiring at the end of next year. What's those involve and what has Harris said about extending those credits or making them permanent? I think that what is involved is the amount of how far into the income distribution subsidized health insurance reaches. If you recall, there was a sort of a provision that there should not be cost claims of more than 8% of income. The idea is to make the subsidies reach further into the income distribution, and that was more or less accomplished by the two pieces of legislation you just mentioned. The aim of the Biden-Harris administration has

been for some time to try to make those permanent because that will lend extra level of stability to the marketplaces. Because they're expiring, as you noted, they will be, I think, front and center on the major piece of legislation that's coming up, which is, as you noted, the expiration of a whole variety of tax and subsidy provisions. I think the major thrust of legislative activity next year will be negotiations over the package of subsidies and taxes that come from the combination of the expiration of the Trump tax provisions and the subsidies for the Affordable Care Act. And my guess is there will be some kind of a grand bargain, in part depending on how the election comes out, that creates a sort of revised constellation of

those two sets of provisions on taxes and subsidies. We're still in the wake of a massive public health crisis. When it comes to future pandemics or other health crises, I haven't heard the candidates speak much about preparedness, and that struck me as pretty odd. quite a bit of money for CDC and supporting the public health infrastructure. And that includes pandemic preparedness, along with some support for continued strengthening of the HHS administration on preparedness. So that's, I think, more or less where you might expect a Harris administration to go. You haven't heard much explicit from Trump, but if you look at proposals in the Congress through the appropriations process coming from the Republican side of the aisle, you'll see a variety of proposals to cut back pretty significantly on the CDC budget. I think that that is something to pay attention to. Now, I don't think President Trump

or Mr. Vance, I haven't heard either one of them speak explicitly about that. Is there anything the candidates haven't weighed in on when it comes to healthcare policy that you think is an oversight? A couple of things. One of the things is we have this mental health and substance use set of problems in this country. They've all been acknowledged in all these debates and back and forth in the social media sphere, but they've been done in very limited terms. Typically, you might think that everything turned on fentanyl. And while fentanyl is extraordinarily important in this, the fact is that across administrations going back to George W. Bush, that includes Bush, Obama, Trump, and now Biden,

even though there's been a lot of new money put into things like opioids and fentanyl and those kinds of threats, we, on a very good day, treat somewhere between 20 and 25 percent of people with an opioid use disorder. And of those, you know, somewhere between 20 and 30 percent get treated with something that's really likely to get them better. And of those, about 40 percent stay on those treatments long enough to actually get the full benefit. If you multiply those three numbers together, you get a very small number. I think that we have sort of failed to get people into treatment for these conditions that have grown enormously over the last 30 years. I think that our failure to talk about that has been quite notable.

Some of the other issues, such as maternal mortality, I think are important and haven't gotten attention. But just in general, public health, just other than things related to the pandemic, have really not gotten the kind of attention they should have given the lessons from the pandemic that we've neglected things for a very long time. And we've, in a sense, failed to build the infrastructure we need to address not only things like pandemics, but the health care consequences of things like floods, hurricanes, tornadoes and the like. We're just not in very good shape to sort of address the full range of health consequences from those.

All right, Richard Frank, thank you for joining us today. Sure thing. You know, Sean, one thing that Richard didn't speak to was women's health issues. So I want to give a little background on some of that, if I may. Among health care issues, a recent KFF poll showed that abortion is the top health care issue for voters. And 61% also said that this year's election will have a major impact on abortion access in the U.S. Harris says she'll bring back protections under Roe v. Wade. Trump says he would veto any federal law banning abortion, but said states should send their own laws. Harris has said that she'll protect access to in vitro fertilization, which Democrats support. But IVF has become a topic that Trump and the

rest of the Republican Party seem to disagree on. He says that the government or insurance companies should cover IVF. Other Republicans don't think so much. All right, well, we're back in a moment with a look at the presidential candidates' plans for the student loan crisis. Stay with us. Sean, as we've noted already, education is one of the biggest expenses we have in this country, at least if you want to go to college. Yeah, according to educationdata.org, the average cost of college here in the U.S. has more than doubled in the 21st century. Students pay an average of $38,270 a year

for tuition, books, supplies, and living expenses. If you break that out into public versus private universities, the average for a public institution is just shy of $10,000 a year if you're in-state, and that's just for tuition. Out-of-staters are looking at shy of $10,000 a year if you're in state, and that's just for tuition. Out-of-staters are looking at more than $27,000 per year, again, just for tuition. The average price for private colleges and universities is just over $38,000 a year, and the total cost of attendance tops $58,000. That's with room and board and books and all that other stuff.

That's why a lot of students end up taking out loans to pay for school. And educationdata.org says that debt load, as of the second quarter of this year, stands at $1.75 trillion. That's trillion with a T. So let's talk about what candidates are proposing on this front and your conversation with Eliza Haverstock, who covers the student loan crisis for NerdWallet. Eliza Haverstock, who covers the student loan crisis for NerdWallet. Eliza Haverstock, welcome to the show.

Thanks for having me. So student loans dominated a lot of the 2020 election cycle with Biden pledging to cancel student debt. To get listeners up to speed, can you sum up what happened to those efforts? Student loan forgiveness was definitely a key campaign issue for Biden in the 2020 election. In August 2022, the White House announced a broad forgiveness program for borrowers who made less than about $125,000 per year. Lawsuits from a series of Republican-led states and groups quickly derailed the program. And then in June 2023, the Supreme Court said this student loan forgiveness plan was unconstitutional and struck it down. In response to the Supreme Court decision, the White House decided to pursue a broad student loan forgiveness plan B, as I like to call it, using a different legal pathway.

It's designed to target borrowers who are struggling the most, so fewer would qualify than under the original Biden forgiveness plan. However, a lawsuit filed by Republican-led states recently blocked this plan too, which could have started rolling out in October of this year. Despite these setbacks, the Biden administration has still made major strides in student loan forgiveness, mostly by fixing and expanding targeted forgiveness programs that already existed, like public service loan forgiveness, income-driven repayment forgiveness, and the borrower defense to repayment program. Since 2020, the administration has forgiven roughly $169 billion in federal student loan debt for almost 5 million borrowers through these existing programs. Wow. Yeah, that's pretty significant.

Does it seem like student loans are still top of mind for voters during this campaign? You know, what are the polls showing? Yes, student loans are definitely still important to voters, especially millions of younger voters. About one in four U.S. adults under the age of 40 has student debt, according to the Pew Research Center. And a recent NerdWallet survey conducted online by the Harris Poll found that more than one in five student loan borrowers say that student loan forgiveness is one of the top issues when choosing a presidential candidate. What do we know about where the candidates stand on student loan policy and financial aid in general? Let's start with some of the issues. Where do Harris and Trump stand on student debt cancellation? Generally, experts expect Harris to carry the torch of Biden's student loan cancellation efforts,

while Trump would likely work to limit student loan forgiveness and different relief measures that were expanded under Biden. You mentioned Biden's Forgiveness Plan B, but there's another Biden policy that has been scrutinized during his presidency, the SAVE repayment plan. Can you explain what it is and where the candidates stand on SAVE? SAVE is the new income-driven repayment plan that the Biden administration introduced last year. The White House likes to say it's the most affordable federal student loan repayment plan in history, and they're right on that one. It cuts monthly payments in half compared to existing plans. It includes an interest subsidy to prevent ballooning balances, and it also offers accelerated loan forgiveness for some borrowers. However, this summer, lawsuits temporarily blocked the plan.

The situation is still very much in flux, and borrowers don't have a lot of clarity on how to proceed. For now, SAVE borrowers are in an indefinite interest-free forbearance, so they don't owe payments, but they also aren't making any progress towards IDR forgiveness. The impact is huge. About one in five borrowers with outstanding federal student loan debt is enrolled in SAVE, so that's about 8 million people. How does the election impact SAVE? The fate of the repayment plan is now largely in the hands of the courts. However, the president can influence the situation by directing the Justice Department how to proceed with appeals. Harris would likely continue to vigorously defend the SAVE plan in court. Meanwhile, Trump is not likely to defend SAVE. One popular student debt cancellation program that you mentioned earlier is Public Service Loan Forgiveness, or PSLF. For listeners, PSLF erases federal student debt after 120 student loan payments for those who work in public service,

such as teachers, doctors, military members, and government employees. But the program was dysfunctional for a long time until the Biden administration streamlined delivery of relief. Probably safe to say that Harris will continue to champion the program, but where does Trump stand on it? Definitely. Experts agree that Harris would continue to protect the program and make sure it functions as it should. Through the program, the Biden-Harris administration has forgiven about $69 billion in student loans for almost 1 million public servants. The future of PSLF is less clear in a Trump White House. Interestingly, a Republican president, George W. Bush, signed PSLF into law in 2007. To your point, during Trump's presidency, PSLF didn't function very well at all. At one point in 2019, the Education

Department rejected 99% of PSLF applications, according to a report from the Government Accountability Office. Another debt cancellation program that you also mentioned earlier is called Borrower Defense Repayment, and that's used to protect borrowers who are defrauded or misled by their colleges, and that's been around since 1995. Have the candidates addressed that program? As a candidate, Harris has spoken on Borrower Defense Repayment. Actually, at the Democratic National Convention last month in Chicago, there was a segment highlighting her role in prosecuting Corinthian colleges back in 2013 when she was California's attorney general. This was a for-profit institution that allegedly defrauded and misled borrowers, and her actions against

Corinthian resulted in $5.8 billion worth of loan discharge for half a million former Corinthian students. The Biden administration has also strengthened the program and forgiven roughly $28.7 billion for more than 1.6 million borrowers through borrower defense and closed school discharges. So it's safe to say that Harris would continue to protect and even strengthen borrower defense. On the other hand, experts don't expect Trump to be particularly supportive of borrower defense. As president, he vetoed a bipartisan resolution that would have made it easier for students to qualify for the program. All right, let's turn to college affordability. The federal Pell Grant has been around since the 1970s and under the current policy gives undergraduates from low-income backgrounds up to $7,395 annually to pay for

college. During Biden's term, he increased funding by $900. Has Harris or Trump spoken about the Pell Grant? Yes, the Harris campaign aims to double the maximum Pell Grant, which could make the grant worth close to $15,000 per year. Congress determines Pell Grant funding as part of its annual appropriations process, so that plan is also dependent on the cooperation of the House and Senate. It's a big subject in higher ed accessibility and access because the Pell Grant hasn't kept up with inflation. So in the 1970s, a Pell Grant covered about three-fourths of the average cost of college attendance. These days, it covers only about one-third, according to the National

College Attainment Network. Meanwhile, experts say that future increases to the Pell Grant maximum are less certain if Trump is elected, though the program itself doesn't seem to be at risk. So, Eliza, both candidates support alternatives to a four-year college degree and want to make them more affordable, but their approaches are a bit different. Can you explain how the campaigns diverge? The Harris campaign is focusing more on making community and trade schools more affordable along with four-year colleges, while the Trump campaign is focused more squarely on those alternatives to traditional colleges. Following the Biden campaign's lead, Harris wants free community colleges and trade schools.

Her platform also calls for subsidizing tuition at minority-serving institutions like HBCUs. Trump and his running mate, J.D. Vance, have emphasized their skepticism of universities. In his campaign platform, Trump calls for cheaper alternatives to four-year schools. So that could mean investing in trade schools, vocational programs, community college, and other types of career pathways. OK, so we've gone over a few different campaign promises that Trump and Harris have made, but how about feasibility? Can the president, whoever they are, take executive action on any of these policies, or will they all need to go through Congress? It definitely depends. The education department and other government agencies have the ability to create regulation

without formal legislation through a process called negotiated rulemaking. So for example, that's how the Education Department has rolled out many of the current income-driven repayment plans, including SAVE. However, enacting new legislation requires the cooperation of the U.S. House and Senate. So some of these proposals will require legislation. For example, the Pell Grant is funded through Congress's annual appropriations process. Formal legislation could also stave off some of these legal threats that we've seen. Many of the lawsuits that have derailed Biden's various student loan efforts allege that he didn't have the authority to enact the rule because Congress didn't approve it.

The fate of SAVE and Biden's Forgiveness Plan B are largely up to the courts at this point, but the next president can influence things. Harris could tell the DOJ to vigorously defend SA save and the plan B forgiveness, direct them to file more appeals. Meanwhile, Trump could tell them to do the opposite. Eliza, is there anything in the Democratic or Republican platforms that the candidates haven't spoken to that you think is worth mentioning? On higher education, generally, both parties are focusing on the issue of campus protests, especially in the context of the Israeli war in Gaza. Trump's agenda actually calls for the deportation of pro-Palestine protesters on college campuses.

The Democratic platform does not go that far, but it still talks about fighting both anti-Semitism and Islamophobia on college campuses. So this topic will probably continue to be a major political talking point ahead of the election. All right. Eliza Haverstock, thanks for joining us today. Thanks so much for having me, Ana. Ana, what I really like about the two conversations in this episode is that they speak to the scope of what could change in our economic and financial lives, depending on who wins the White House. As we mentioned in the first episode, it's not that the individual elected will single-handedly make big changes, but an administration's broader agenda and whether they have the support of Congress can have significant repercussions in our individual lives, whether it's how we pay for medical expenses or what will happen to federal student loans.

So listeners, I hope these past four episodes help you make a more informed decision about who you'll vote for to create the financial and economic future that you want for your family and your country. Exactly, Sean. As we said at the top, this election is important, and the candidate you choose will impact your personal finances and many other aspects of our daily lives. We've gone over a lot of Trump and Harris's proposals over the last few weeks, but there's more to learn about. So even though this is the end of our series,

NerdWallet has more financial news and election coverage that focuses on what the candidates will mean for your money. We'll put a link to our financial news hub in today's show notes or just search online for NerdWallet News. Well, Ana, thank you so much for all your hard work on this series.

I know that I learned a lot from it. It's my pleasure, Sean. Thanks for having me. For now, that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. This episode was produced by Tess Vigeland and myself. Rick VanderKneife and Amanda Darangowski helped with fact-checking. Megan Maurer makes our audio. And a big thank you to NerdWallet's editors for all their help.

Here's our brief disclaimer. We are not financial or investment advisors. audio. And a big thank you to NerdWallet's editors for all their help. Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.