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

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Hello and welcome to MarketWatch’s Extra Credit section, a weekly overview of the news through the lens of debt.

This week we are talking about philanthropy in the form of loans and student debt relief for members of the military who have served at risk. But first, the interest payments on the post 9/11 wars.

The bombings at Kabul airport this week, which killed 13 US soldiers, 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 from the country by August 31, Americans will likely pay the financial cost of war for decades to come.

That’s because the nation largely funded the post-9/11 wars through debt, according to an analysis of the Costs of War Project, an initiative by academics at Brown University and Boston University. Taxpayers have already spent $ 925 billion in interest payments related to these wars, according to the analysis.

The analysis estimates – if America had pulled out last year – that the cost of interest on Afghan war debts could reach $ 2 trillion by 2030 and $ 6.5 trillion by 2050 .


“There are all these various costs that you don’t talk about when the American public hears about how expensive war is.”


– Heidi Peltier, author of the analysis and project director of the Costs of War Project at Boston University

“There are all these various costs that you don’t talk about when the American public hears about how expensive war is,” said Heidi Peltier, author of the analysis and project director of the Costs of War Project at the Boston University. “One of them is interest charges. ”

Whether we pay interest on our war expenses is a political choice. Much of the wars of the last century have been financed largely by tax increases and war bonds, the analysis notes. But when the United States entered these wars in the early 2000s, the Bush administration actually cut taxes. This meant that the funding for wars had to come from another source, in this case funding.

This approach prevents “the public from knowing what the real cost of war is because they are not feeling the effects now,” Peltier said. “It shifts the cost to future taxpayers. “

Debt relief for the military after a long wait

A group of Americans who have disproportionately borne the cost of the war will get the financial assistance they have been entitled to for years.

More than 47,000 active and former active duty members will have the interest on their federal student loans canceled retroactively, the Education Department said last week. Members of the military deployed to areas of imminent danger have been eligible for interest relief on their student loans for years, but only a small fraction have actually had access to this benefit.

In 2019, the ministry waived interest on loans for just 4,800 military personnel, the agency noted in its announcement. Now, through a data match agreement with the Ministry of Defense, the Ministry of Education can identify borrowers eligible for the benefit and automatically waive their interest.


More than 47,000 current and former active duty members will have the interest on their federal student loans canceled retroactively.

While the relief is a boon to the military, it comes after years of borrowers struggling to access it. Between 2008 and 2014, when thousands of soldiers served their endangered countries during the post-9/11 wars in Iraq and Afghanistan, only 633 borrowers had their interest canceled, noted Kay Hagan, a former Democratic senator representing North Carolina. North in 2014..

“This is an extremely important benefit which recognizes, in addition to other military consumer protections, that if you were deployed to some of the most dangerous places in the world, we should not allow interest to accumulate on your. student loans, ”said Seth Frotman, executive director of the Student Borrower Protection Center. “For nearly a decade, this promise was illusory.”

Frotman, who worked as a senior advisor to Holly Patraeus, deputy director of military affairs at the Office of Consumer Financial Protection and later as CFPB’s student loan ombudsman, has advocated for automation for years. interest benefits.

He pointed to the paperwork and missteps of student loan providers – who have been accused of making it harder than necessary for borrowers to access the benefits they are entitled to – as the reasons why such a small number of service members have had their interest waived before.

The challenges that military and veterans face in accessing consumer protection can often serve as a warning sign for broader issues in a market. The fact that service members have paid interest they did not owe for years is an indication of the challenges student loan borrowers typically face in accessing the relief they are entitled to.

For example, public servants, including the military and veterans, have struggled to have their loans canceled under the Public Service Loan Forgiveness Program, which allows borrowers to have their federal student loans paid up. after 10 years of payments.


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

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

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

Previously, these borrowers had to go through an application process to access the full and permanent disability release to which they are entitled.

Despite these measures, Frotman and others are pushing the agency to address other issues plaguing the student loan industry – like the challenges borrowers face in accessing the PSLF – by automating benefits when the government knows who. is eligible, ahead of the coronavirus era pause on student loan payments and collections end in February.

“Once the payments are reactivated, unless they fix these programs and do it in a quick and efficient manner, I’m really worried that people will have bills on debts that they don’t have to pay,” Frotman said.

When a philanthropic pledge is actually a loan

Last year, in the wake of George Floyd’s murder, major corporations made high-profile financial commitments to tackle racial injustice. A little over a year later, the Washington Post followed through on those promises.

What they found is that of the roughly $ 50 billion from large corporations pledged to various causes last year, a small fraction is in fact giveaways. Instead, roughly $ 42.5 billion of financial commitments come in the form of investments or loans that businesses are expected to profit from, much of which is mortgages.

Many of these promises aren’t purely charitable, but that’s not surprising, given the incentives companies have to do good, or at least appear to be doing good and not lose money, said Mehrsa Baradaran, professor at the university. from the California Irvine School of Law and an expert in banking, financial inclusion and the racial wealth gap.

“I don’t think there’s anything cynical going on,” said Baradaran, 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, can indeed help black households build wealth and also be profitable for the businesses that provide them, a declared Baradaran. But whether mortgages prove to be a boon for black families, it will depend on many factors, including loan terms like the interest rate, she said.


Even though the practice of redlining is now illegal, evidence suggests that black households still face discrimination in their pursuit of home ownership.

“The distrust with which some respond to these announcements is rooted in experience and history,” said Baradaran. This story includes, as Baradaran notes, the subprime mortgage crisis in which lenders have targeted these communities with predatory loans.

Of course, it also dates back almost a century to the New Deal, when, as part of a program to increase homeownership, the federal government refused to insure mortgages made to homeowners. black neighborhoods, effectively excluding these consumers from the market. Lenders have continued this practice for decades, robbing black households of America’s key wealth creation asset with implications that still persist today.

Even though the practice, known as redlining, is now illegal, evidence suggests that black households still face discrimination in their pursuit of home ownership. A survey released this week by The Markup, a nonprofit newsroom covering technology, found that across the country, black borrowers were 40 to 80% more likely to be denied a home loan than borrowers. blanks that looked identical on paper, due to an opaque mortgage. subscription algorithms.

The analysis notes that in the past, the mortgage industry has criticized these types of analyzes for failing to take into account certain factors, such as the amount of debt an applicant owes as a percentage of their income (which applicants blacks may have higher debt to income ratio is a legacy of systemic racism that has impacted the ability of black households to build wealth).

But what the Markup found was that among high-income borrowers, black families with less debt were rejected more often than their white counterparts with more loans.


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