Thoughts of an Idle Mind, Part 5: Student Loan Forgiveness

I'm not knocking it. My student loans are over $140K. $20K off isn't going to make a dent in that, but I'll gladly take it!

I understand people's position against this loan forgiveness debate. Those who are opposed to it, from what I am seeing, are opposed to bailing out people for taking on debts. In principle, I agree. Absolving people of their responsibility and not holding them accountable doesn't help anyone. People do need to be held to account for their life choices. School debt is not bad debt. It is an investment into your future. The problem is people are REALLY bad at planning, especially financial planning.

People bring up the bail out of the banks and auto industry in 2008 as a justification. On the surface, this is true, but it's much more complicated than that and isn't even an apples to oranges comparison. We are talking maybe fruits to vegetables comparison at best. The government bought bank assets and gave loans and bought stock in the auto manufacturers, for one, and then turned around and made money off of the assets and stocks later, as well as saved them more money from spending on social services for, and missing taxes from, the unemployed. The federal loans for college come from the government, so I don't think the government can buy your debt when they are the ones who issued it in the first place.

The other thing people bring up is the PPP loans. Well, I don't think that is fair. The PPP loan doesn't pay for people's personal life choices. The PPP is technically for payroll and other company-wide costs. It's perfectly understandable and beneficial for individuals who own businesses to apply and receive this loan and even get it forgiven because there is a direct benefit to the taxpayers who are funding it (keeping people employed). There is no direct benefit from wiping student debts. Yes, you may have more money to spend, but you don't increase government revenue and you don't prevent government spending.

So far the federal government has forgiven for-profit entities and highly unusual circumstances, things that they can explain to debt holders or maybe from situations in when they could recoup the cost. In short, how does the government justify wiping student debts? It's very difficult to do. It's business, and business doesn't operate on morals and values, just on laws and digits. So who pays for the debt if the government bails out the students? Taxpayers of course. Why? Because it's our debt in the first place. The government borrowed money to give out money in the form of student loans. Borrowed government money is always backed by tax dollars first, or the potential tax dollars. So when the government issued student loans, it's almost like issuing tax money to borrowers.

Now, there are loan forgiveness programs that are already in place that people just aren't taking enough advantage of and why I stay quiet or indifferent to the whole thing. The Public Service Loan Forgiveness Program (PSLF) is the one I use, and it's amazing. You can literally rack up all the debt you want, work for a government or non-profit agency, get on an income-driven repayment program that charges you pennies on the dollar, do that for 10 years and all of your debt is forgiven. No questions asked. Biden threatened to change this program during his run for office. He said he would limit the forgiveness amount to $50K, with forgiveness happening yearly at $10K a year. I would have been upset! At $140K, $50K still doesn't even cover half! So even if he didn't take any of the current steps, I would have been grateful just for not moving forward with that original idea. If you work in private sector, the Income-Driven Repayment Program charges you the same way as the PSLF but you just have to do it for 20-25 years and then all is forgiven. Either way, there are viable ways out of debt. Now, the taxpayer is STILL on the hook for the current forgiveness programs, but at least you are paying/contributing to your debts.

In short, NOTHING is free. SOMEBODY has to pay. And typically the person who pays is the very same person that think they got it for free; they just never realize it.