Student Loan forgiveness

So if you pay attention to the news you know the President of the U.S. has issued an executive order to forgive up to 10K of student loan debt for U.S. tax payers who make less than 125K annually. This blog isn’t overtly political so we aren’t going down that rabbit hole here. I do however devote a portion of my blog to finance. I am a finance professional, and the finance posts I make on this blog are my opinion only, they are not financial advice.

So that out of the way, let’s say this off the bat. Reducing individual debt is the quickest way to wealth. When you aren’t sending your money to other people, you get to keep it and accumulate wealth. So that’s a net positive. There are however several issues with the loan forgiveness as announced. The first one is, the President does not have the ability to forgive debt, only congress can do that.

What that means is this will inevitably be challenged in court. A republican somewhere will file a lawsuit and if it goes to the supreme court, which it may it would likely be overturned. The other thing announced was another freeze on payments until the end of the year. Meaning you do not have to make your federal student loan payments until 2023. This has been in effect since covid lockdowns and its likely this will be extended again.

The fastest way to wealth, is being debt free

To be clear the President DOES have the authority to do this via executive order. There are all sorts of views on this issue. Some will say “why should they get a hand out and I don’t?” others will say “education is a right and it should all be free”.  The biggest issue I see here is the notion of loaning teenagers thousands of dollars in the first place. Who benefits from that exactly? An 18-year-old takes out loans to go to school, to obtain a job to pay off the loan?

I don’t want to be flippant here, education is fantastic you should pursue it. But doesn’t it seem dubious in the first place that the institutions giving the loans decides to forgive them later? Why give them in the first place? Some of these college kids are staring down hundreds of thousands of dollars in student loans. They were railroaded into the education industry and now sit on a pile of debt. Sure they will have a degree at the back end but how bitter must it be to go to work every day?

I worked full time and went to college, I cashed flowed both of my degrees. My kids each got 30K set aside for them to go to college, everything else they have to cover on their own. They chose state schools and are making it. I got the 30K for each by working, inheriting etc. and I am happy to do it. If they take a loan I expect them to pay it back. However, I would caution them both before ever taking a loan at such a young age.

Student loan forgiveness is a net positive if you are one of the lucky ones who qualify. Don’t be fooled here, this is political. The problem is all the people out there who don’t get it will be pissed off, and then there is the uncomfortable situation of “where does the debt go”? it just doesn’t evaporate, someone will have to pay it. Guess who? All of us, yes, you get to help pay off someone else’s debt.

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