Student debt is a mess. The total owed to the federal government is $1,700,000,000,000.00. An entire book could be written about it, and I’ll attempt to hit highlights (or lowlights) in a page or two.
A student loan should be like any other loan: you borrow money, you pay it back. And historically, many poor students from inner cities, rural areas, and Appalachia, for example, borrowed money from a bank to get a good education. And the extra income from a good job meant they could pay off the loan quickly and get on with their lives.
The student loan business became a mess when the federal government got heavily involved, passing rules, and eventually taking over 90% of the loans.
Let’s start by saying perhaps 10% of these former students have a legitimate reason for not being able to repay the loan. Severe illness, a tragic accident, or they were fraudulently talked into a big loan for a worthless education at a private for-profit school.
The other 90% ought to pay up. College graduates are in a much better income situation than the average person without a degree. The unemployment rate for college graduates is 2%. There are 11 million open jobs. There is no reason why they can’t repay their debt to the federal government.
Suppose President Biden lets you walk away from your part of the $1.7 TRILLION debt. Who will pay it? The debt you signed for will end up being paid by workers who never attended college and college graduates who managed their finances and paid off their student loans. Do you think that’s fair? If Biden cancels $5000 of debt for all 44,000,000 who owe money, should he also give $5000 to ones who already paid off their loans? Maybe the most unfair part of forgiving a loan is that a third of the debt is owed by wealthy families. Doctors, lawyers, and other high salaried graduates hold 40% of the debt.
One suggestion is that if you insist on forgiveness of your student loan, the college should cover at least a third of that cost. “No, no, no!” they would yell. Would colleges allow another feasible plan? As part of their continuing fundraising from alumni, encourage them to contribute to an account that would help pay off loans run up by other alumni. No, colleges only want contributions to help present and future students. Or suppose a wealthy alum offers $25,000,000.00. It’s likely that person wants his/her name on a building rather than simply sharing it among other alumni to help pay off student debt. And the college leaders would fiercely agree.
Student loans should be approved based on the expectations of the recipient paying it off. This is how all other loans operate. For most students, this is the first loan they ever signed for. Paying it off quickly is a good lesson that would serve the rest of their lives. Can you believe a fourth of these loans are owed by grads over 50 years old? They ought to be embarrassed by having their pictures published. A lot of ‘em retired before paying off what they owe. Did they learn nothin’ in college?
Credit: some of this information is from “Forbes Advisor” (Apr. 5, 2022), and the “NY Post” (Apr. 24, 2022).
Historic quotes by Will Rogers:
“The only salvation I can see for the young is to increase the college term to an additional four years. Give ’em four more years in college, and it will save parents an awful lot of worry, too. Just think of taking a son or a daughter off your hands for another four years. You’ll say, ‘Well, what could they learn in another four years?’ Well, there must be some little something about making a living that they haven’t learned yet, and they could kind of work on that for the next four years.” Radio, June 2, 1935
“Hurrah for [Treasury Secretary Andrew] Mellon for answering, today, the Faculties of Columbia and Princeton on debt cancellation. It almost takes a sense of humor for college professors to advise Mellon on money matters.” DT #200, March 17, 1927 (this “debt” was owed by allies in WWI, not students)