Why Americans will pay for the costs of the war in Afghanistan for decades

Hello and welcome back to MarketWatch’s Extra Credit column, a weekly look at the news through the lens of debt.

This week we’re discussing philanthropy in the form of loans and student debt relief for military personnel who have been at risk. But first, interest payments on the post-9/11 wars.

The Kabul airport bombings this week, which killed 13 US troops, are a stark reminder of the human toll of the war in Afghanistan. And even if President Joe Biden meets a deadline to withdraw US troops by August 31, Americans will likely pay the financial costs of the war for decades to come.

That’s because the nation largely financed the post-9/11 wars with debt, according to to an analysis by the Cost of War project, an initiative of scientists from Brown University and Boston University. Taxpayers have already spent $925 billion in interest payments related to those wars, the analysis shows.

The analysis estimates — had America pulled out last year — that the cost of interest on Afghanistan’s war debt could grow to $2 trillion by 2030 and $6.5 trillion by 2050.

“There’s all these different costs that don’t get talked about when the American public hears about how expensive the war is.”

— Heidi Peltier, the author of the analysis and the project director of the Cost of War Project at Boston University

“There are all these different costs that are not talked about when the American public hears about how expensive the war is,” said Heidi Peltier, the author of the analysis and the project director of the Costs of War Project at Boston University. “One of them is the interest costs.”

Paying interest on our war expenses is a political choice. Most of the wars of the past century have been funded in large part by tax increases and war bonds, the analysis said. But when the US entered these wars in the early 2000s, the Bush administration cut taxes. That meant funding for the wars had to come from another source, in this case funding.

This approach ensures that “the public doesn’t know what the true costs of the war are, because they’re not going to get into trouble now,” Peltier said. “That crowds out the cost for future taxpayers.”

Debt relief for service employees after a long wait

A group of Americans who have disproportionately borne the costs of war will receive financial support that they have been entitled to for years.

More than 47,000 current or former active-duty members will see interest on their federal student loans retroactively waived, the Department of Education announced last week. For years, military personnel deployed to areas that put them in immediate danger have been entitled to a waiver of interest on their student loans, but only a small proportion have actually taken advantage of that benefit.

In 2019, the ministry waived interest on loans for just 4,800 service workers, the agency noted in its announcement. Through a data matching agreement with the Department of Defense, the Department of Education can identify borrowers who qualify for the benefit and automatically waive their interest.

More than 47,000 current or former active duty members will see interest on their federal student loans retroactively waived.

While the relief will be a boon to service workers, it comes after years of borrowers struggling to access. Between 2008 and 2014, when thousands of soldiers served their country at risk during the post-9/11 wars in Iraq and Afghanistan, only 633 borrowers were renounced their interest, Kay Hagan, a former Democratic senator who represents North Carolina. listed in 2014.

“This is an extremely important benefit that, on top of the other military consumer protections, recognizes that if you’re deployed to some of the most dangerous places in the world, we shouldn’t let the interest on your student loans go up,” he said. Seth Frotman, the director of the Student Borrower Protection Center. “For nearly ten years, that promise was an illusion.”

Frotman, who served as senior advisor to Holly Patraeus, deputy director for service officers at the Consumer Financial Protection Bureau and later as the student loan ombudsman for the CFPB, has pleaded to automate the interest benefit for years to come.

He pointed to red tape and missteps by student loan managers — who were accused of making it more difficult than necessary for borrowers to access benefits they are entitled to — as the reasons why such a low number of service employees were previously waived.

The challenges service workers and veterans face in accessing consumer protection can often serve as a warning sign of broader issues in a market. That service workers paid interest they didn’t owe for years is indicative of the challenges student loan borrowers generally face in accessing relief to which they are entitled.

For example, officials, including service workers and veterans, have struggled to get their loans canceled under the public loan forgiveness program, which allows borrowers to repay their federal student loans after 10 years of payments.

There are indications that in the future, fewer borrowers will have to raise their hands to receive benefits they are already entitled to under the law.

There are indications that in the future, fewer borrowers will have to raise their hands to receive benefits they are already entitled to under the law.

Earlier this month, the Biden administration automatically paid off the debt of more than 323,000 borrowers with severe disabilities, using a data match with the Social Security Administration to identify the borrowers eligible for relief.

Previously, these borrowers had to go through an application process to access the total and permanent disability benefits for which they are eligible.

Despite these steps, Frotman and others pressured the agency to address other issues facing the student loan industry — such as challenges borrowers face in accessing PSLF — by automating benefits when the government knows who is eligible. comes, before the coronavirus-era hiatus on student loan and collection payments ending in February.

“Once payments are turned back on, unless they fix these programs and do it in a way that’s quick and efficient, I’m really concerned that people will get bills for debt that they don’t have to pay,” Frotman said.

When a philanthropic commitment is actually a loan

Last year, after the murder of George Floyd, major corporations made well-publicized financial pledges to curb racial injustice. A little over a year later, the Washington Post kept those promises.

What they found is that of the roughly $50 billion large corporations that pledged to various causes last year, a tiny fraction are actually gifts. Instead, about $42.5 billion of financial liabilities are in the form of investments or loans that the businesses can benefit from, much of which is mortgages.

Many of these pledges aren’t just charity, but this isn’t surprising, given corporate incentives: to do good, or at least look good and not lose money, said Mehrsa Baradaran, a professor at the University of California. Irvine School of Law and an expert on banking, financial inclusion and the racial wealth gap.

“I don’t think there’s anything cynical about it,” says Baradaran, the author of The Color of Money: Black Banks and the Racial Wealth Gap.

Increasing access to mortgages for black homebuyers, as some of these companies have pledged to do, could indeed help black households build wealth and also be profitable for the companies that offer them, Baradaran said. But whether the mortgages prove to be a boon to black families depends on many factors, including the terms of the loan such as the interest rate, she said.

While the practice of redlining is now illegal, evidence suggests that black households continue to face discrimination in their quest for home ownership.

“The caution with which some approach these announcements is rooted in experience and history,” Baradaran said. That history includes, as Baradaran points out, the subprime mortgage crisis in which lenders focused these communities with predatory loans.

Of course, it also goes back almost a century to the New Deal when, as part of a program to increase home ownership, the federal government refused to insure mortgages to homeowners in black neighborhoods, effectively excluding these consumers from the market. lenders continued the practice Deprived black households of the most important asset to wealth-building in America for decades with implications that still endure.

While this practice, known as redlining, is now illegal, evidence suggests that black households continue to face discrimination in their pursuit of home ownership. An research Published this week by The Markup, a nonprofit newsroom that covers technology, black borrowers nationwide were 40% to 80% more likely to decline a home loan than white borrowers who looked similar on paper, due to opaque mortgage underwriting algorithms.

The analysis shows that the home loan industry has criticized this type of analysis in the past for failing to take into account certain factors, such as how much debt an applicant has as a percentage of their income (that black applicants may have a higher income debt ratio is a legacy of systemic racism that has impacted black households’ ability to build wealth).

But what the Markup found is that black families with less debt were more likely to be rejected than their white counterparts with more loans.