From a young age, I knew that I could not go to college unless I did well academically. A full decade before submitting college applications, I knew that education came at a cost. When it came time to apply for college, I spent months researching how best to fund the endeavor.
I studied vigorously in elementary school to prepare for middle school, and then high school. In high school, I took all honors, advanced placement, and dual enrollment courses to achieve a high GPA and do well on my standardized testing. And my hard work paid off. An in-state public university offered me a full-ride scholarship for the cost of tuition ($36,000) and a financial need-based grant for the cost of books and fees ($8,000). After submitting 127 applications for private scholarships over the course of two years, I was awarded one scholarship-loan where I was awarded $4,000, $2,000 of which would be paid back after graduation. My parents saved money in 529, which covered my housing costs ($30,000). If my parents hadn’t contributed, I would have gone to a community college for two years prior to attending the local public university. Even at eighteen years old, I recognized debt as something to be avoided, wherever possible.
I have friends who followed similar paths to avoid and minimize student debt. They chose to pursue academic or athletic scholarships, apply for grants, and write essay after essay for niche scholarships aimed at minorities and left-handed Christians who love dogs. When the money didn’t come through, they worked their way through college or completed their general education courses at the community college to keep costs down. They did their research and made smart decisions.
A student loan is a contract. I believe quite passionately that the university system is a scam, with skyrocketing prices and no promise of employment at the end of the journey. I think that educational institutions are acting in an unethical and predatory manner on the young and uninformed, and I think that the media has presented college a non-optional stepping stone to success. Nevertheless, when a prospective student signs the paper agreeing to the $200,000 loan, I believe it’s their responsibility to step back, do the math, and assess whether it makes sense in their unique situation.
My partner’s nephew is seventeen and we are actively discouraging the apathetic child from wasting $125,000 to explore his interest in the dying field of sports journalism at the local public university. It’s one thing if you are an academic superstar with your sights set on medicine, engineering, or computer sciences; if you don’t fall into those categories, it really is hard to justify the costs.
I have been told repeatedly to step back and stop having an option because, since I’ve already paid my student debts, the topic does not concern me. But it does concern me.
Firstly, I, like every other law-abiding citizen pay taxes. I am happy to pay taxes on programs that support the common good and create safety nets for those in need. I know people who benefit from disability, social security, food stamps, government health care, and unemployment benefits. I am happy to support those programs. I know that millions of families benefit from public education. While I think most public school need some help with funding allocation, I have no problem with education taxes. Though I may not agree with the excessive military budget, I trust that our country’s decision makers are doing the right thing. I pay taxes to support my community–at the city, country, state, or federal level–because I want to support the people around me in the most beneficial and cost-effective manner.
The thing is, forgiven student debt does not simply vanish. It gets transferred to the national debt and becomes a liability for taxpayers rather than borrowers. And I don’t feel comfortable paying taxes to cover someone else’s poor decision-making. I am not saying that everyone with student debt lacked good judgement, but rather that some number of those who would benefit from loan forgiveness did and, perhaps, so do. If an individual did not research how student loan work or make the effort to weigh the pros and cons, I cannot feel confident that the newfound riches in their monthly budget will be reallocated prudently.
In a perfect world, those forgiven of their student debts would use the extra several hundred dollars each month to pay off consumer credit cards, build up an emergency savings account, and gain the financial security that was previously out of reach. I worry that those same students that did not qualify for academic scholarship and that took out an extra $50,000 in students loans for a luxury apartment and booze will continue to live on the edge, waiting for the next government handout. I don’t believe those who are facing the consequences of their ignorance and poor decisions deserve to be saved, in this case.
The solution I would propose is to pair a limited student forgiveness or educational credit with a personal finance or money management course. I am certain that many people were taken advantage of when applying for student loans and I am okay with settling the score if that is some level of confidence that the same mistakes will not be made again in the future. The USA is $28 trillion in debt and the average American is $145,000 in debt at time of writing. While predatory practices as surely a factor, I would venture to guess that much of the debt is simply poor decisions and lack of information. And I believe that most people would like to do better, but they simply don’t know where to begin.
Personally, I chose to attend the cheapest school instead of my preferred option, buy the cheaper (outdated) version of books and guesstimate the difference, and live on ramen for four years. It was the frugal and logical choice, but many students may not have learned the true value of money prior to venturing off to college.
Teaching individuals about personal finance could help drastically shift the numbers, as well as the dialogue. Supplemental financial education would ensure that any student loan forgiveness plan would be a one-time correction, rather than set a unsustainable precedent going forward.
Second, cancelling student debt without asking for anything in return is a poorly-thought out plan, as it stands. The initiative would be problematic alongside the existing forgiveness programs, which encourage teachers, doctors, lawyers, and others to serve in high need-areas, or young Americans to opt for the military, or other public service. When there is no longer an incentive for doctors to work in a rural setting or for teachers to work with troubled kids in tough neighborhoods, we will lose an important recruiting tool and these under-served communities may suffer for it. The same goes for military recruitment, as many applicants join to take advantage of the education reimbursement aspect.
Of 255 million adult Americans, just 45 million have federal student debt. The same individuals who are pushing student loan forgiveness are demanding equity in other areas do not seem to recognize the discrepancy in this particular area. How is it equitable to award tens of thousands of dollars to 17.6% of the population, but ignore the other 82.4% who repaid their debt, chose a path that involved loan forgiveness, or never went to college. For the cost of forgiving $10,000 in debt per borrower, the federal government could instead cut every adult American a check for just under $1,500. Especially in light of the Covid-19 pandemic, it’s those without a college education that are disproportionately affected by unemployment. If citizens are demanding equity, doesn’t an across-the-board stimulus payment seem like a better choice?
Furthermore, the immense cost of student loan forgiveness would cut into federal resources that could otherwise be used for anti-poverty efforts. While the lower-middle class and upper-lower class are bridled with student debt, those living poverty may not even consider college to be an option. Safety nets exist, at least in regards to federal student loans, that allow repayment adjustments based on one’s income. If a debtor is currently struggling to repay loans, assistance is already available if you can evidence your financial distress.
There are children, disabled persons, and families living in poverty whose basic needs are not being met. Successful programs are already in place to provide affordable housing, supplemental nutrition, and school programs for children. Student loan represents discomfort and stress for millions, but directing those funds to those living in poverty would alleviate the physical suffering of millions, as well as bring downstream benefits in terms of enhanced education outcomes, stronger families and less multi-generation poverty.
Additionally, I fear that this one-time loan forgiveness plan will set a precedent and, going forward, everyone will expect a free education. I believe that education is the most important thing a person can invest their time, effort, and money towards. However, I also believe that you get what pay for and worry that a free degree will remove the responsibility and accountability that comes with investing in oneself. During my first semester of college, a professor pointed out that at the current tuition rate, each one-hour lecture cost me $340. In my four years of college, I never missed a class. If the education had been free, I may have been tempted to sleep in or skip class on occasion, and I suspect many others would do the same.
A better system would incentivize schools to teach students and support their transition into the workforce. What if universities were designed to offer students the knowledge, resources, connections and support to do well academically and obtain a desirable job immediately after graduation? What if a university would not be paid until a student had successfully completed their program and been hired in a degree-adjacent job? On top of that, if the government freely paid for everyone’s education, what’s to stop the university for further jacking up the price of tuition. In the thirteen years since I began college, the tuition costs have risen 232%. I imagine that if consumers were no longer to required to weight to costs and benefits of their education, the exponential costs would continue to rise.
Ultimately, this issue comes down to identifying the root of the student debt problem and considering the best way to unearth the deeply-established weed, rather than rip off its leaves temporarily. In my view, the root cause of the student debt problem has many petals: public university is overpriced and there is no body regulating those costs, society projects an unrealistic value on the college degree and paints is as a guarantee of high-paying work, children are not taught personal finance at home or in school, the average citizen does not obsessively track government spending and thus does not understand the long-term implications of additional or reallocated federal debt, and the average citizen doesn’t looks past social media and mainstream news outlets of information. None of these are inherently wrong, but I think there is significant misunderstanding around federal student loan debt, which makes identifying solutions especially challenging.
At the end of the day, I think the best solution would be a combination of reigning in university costs to make attendance affordable for most, combating predatory loan practices that target the young and uninformed, and teaching children personal finance in schools or at home so that they can easily recognize when they are being ripped off or taken advantage of. The argument here isn’t that student loan forgiveness should not be offered to those in need, but rather that whatever action is taken should serve to empower the recipients. Everyone deserves the opportunity to recognize and correct a past mistake or misjudgement. However, being handed $10,000 or $100,000 with no strings attached will not achieve that, and will only serve to indemnify debtors and create a consequence-free environment where we need not read the fine print.
The government should serve as a safety net, not our savior. The current bill is presenting the American government as a hero to the American middle-class, and we don’t need that. We need to impart system change to the education system to ensure the student debt crisis does not remain a problem going forward.
I agree with you. Qualifying for student loan forgiveness does not teach the student lessons about finances. Most teenagers haven’t lived long enough to understand the value of a dollar, and sadly, the majority of degrees do not pay the bills. That’s the cold hard truth. A lot of kids are taught to peruse their passions but they need to understand where the job market is currently at, and which jobs are going to pay the bills after they finish university/college. $125,000 to explore one’s passion seems like a huge waste of money to me especially when it could be used for something more practical.
At the same time, who wants to spend the majority of their lives paying off student debt? That sounds awful to me. I was super lucky to have family help me pay for school (2 degrees) so I wouldn’t have to take out loans. There is no way I would have gone to school if I knew I would have a mountain of debt to deal with later on. This is why I opted out of grad school because I would have had to pay for it myself, and I didn’t want to specialize in anything too specific.
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It’s so refreshing to find someone who is on the same page, and you make some great points! I was encouraged to follow my interests, so I obtained a basically-useless degree in psychology with minors in pre-med and anthropology. I’m really lucky I graduated with almost no debt because it took me several years post-graduation to get a decent job. I can’t imagine working a minimum wage job with a college degree and $100,000 in student debt. I also would not have gone to college if it meant taking on a ton of debt, and it’s the reason I’m not really considering graduate school (even though I would go in a heartbeat if it was free). I really wish there was better financial education in schools or at home… I think it would solve so many problems, but I suppose that knowledge would reduce the power of capitalism, which big corporations and governments probably don’t want. Thanks for sharing your thoughts, Hilary!
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I completely agree with you! 😄 Well said – knowledge would definitely reduce the power of capitalism. Capitalism wants us to stay clueless about what’s really going on. I too got a useless degree in biology because my parents said they would pay for the majority of my degree and take on my debts if I studied science (poor parents). They thought a science degree would pave the way for a brighter future for me. Reality slapped me in the face shortly after obtaining that degree. It was my own choice to get a second degree that was geared towards health care. I quickly learned (on my own) that there are jobs in health care and that I need to stick to something that will pay the bills. They were not happy that I didn’t want to go to grad school and I got a lot of resistance/unsolicited advice from family members. Some of them made me cry. However, quitting was not an option for me. It just meant that I needed to do something for myself, for once.
Going to grad school is definitely a luxury, but not a need. My husband did not go to grad school and became a chemical engineer after graduating from uni. Neither of us ended up with debt and I realize how lucky we are… at the same time, we made a lot of sacrifices. For instance, we still rent a place and don’t own our own house, we buy used furniture, and we are very frugal people. Being broke students taught us the value of a dollar! 😅
Yeah, I’m with you there. Hellz no to having $100,000 worth of debt!! Yuck!!
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Financial literacy is probably the most useful and important thing a young person should learn about, the younger the better and keep it consistent with their developmental age… Yet it is not taught… Not even a little bit… At least not where I live… I can’t help but wonder how I could have done better earlier on in life and how that could have saved so many ppl’s debt loads…
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Yes, I completely agree! I’m fortunate that my parents taught me about finances at home and I learned a bit in my private elementary school. However, I know so many people who don’t have that foundation and ended up with consumer debt, high-interest student loans, home foreclosures, and no retirement fund because they prioritized a new car or luxury apartment. It’s hard because they don’t know what they don’t know… but if their parents are financially illiterate and schools don’t teach money management, it’s nearly impossible to break the cycle.
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Great work! Very helpful article. Thanks for such honesty and being straight to the point. Thanks for sharing.
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Thanks for stopping by!