There is a growing trend in America. Actually, there are two growing trends. More and more young people are drowning in student loan debt. And more and more young people are pinning their hopes on student loan debt forgiveness programs which promise to waive debts after ten years.
What kind of message does this send to young adults?
What other products could you imagine offering such a deal and remaining viable?
Can’t Afford Your Car – We’ll Waive the Balance!
Let’s see. What if I bought an $80,000 car I couldn’t afford, but financed it on a 15-year car loan. After 10 years my remaining balance would be waived, if car loans operated like student loan debt forgiveness programs.
What do you think would happen to the cost of cars if this were the case? What do you think would happen to the auto finance industry if this were the case?
Exactly. That’s where we find ourselves today.
In its infinite wisdom, our government, under the Affordable Care Act, decided to federalize all student loan programs. Yes, you read that correctly. Under Obamacare.
Most people were unaware at the time that the bill so haggled over to bring health care to the uninsured actually addressed the student loan crisis by arguably making things much worse.
By federalizing the student loan program they flooded the market with government dollars which has helped to greatly inflate college tuition.
Good Student Loan Debt Forgiveness Programs
There are some good student loan debt forgiveness programs, typically offered at the state level for specific professions.
For those students who agree to pursue one of these specific degrees, and then work a few years in an under-served community, often times the participating state will forgive student loan debt over a period of service-cancelable years of service.
Now that is a sweet deal, and far better than everyone getting a waiver after ten years, regardless of the chosen degree, profession or ability to repay the debt.
Of course the military also offers a pretty sweet deal, if you can avoid getting shot at.
Military members are eligible for the GI Bill, which allows them to attend school after or during service for no or subsidized costs.
This is a particularly great way for those wanting to enter expensive degree programs (think law or medicine) to get on-the-job-training and paid-for academic training while serving their country.
Automatic 10-year student loan debt forgiveness programs area sending the wrong message to our young people.
The program is creating a generation of 20 somethings unable to move forward, financially or otherwise, because they are being held back by the burden of student loan debt. They cannot buy a house. They cannot take family vacations. They rarely have any money for giving.
Instead, we should offer more incentives for parents and students to save for college, which would lead to a lower debt burden for new graduates.
These graduates would have more disposable income and be able to become greater participants in the economy, increasing tax revenues and the number of people buying luxury goods – a win-win for both government and its citizens.