It’s understandable why there is a strong sentiment to just cancel student loan debt, and this idea is growing in popularity. But is canceling student loan debt really the proper path to take? Will it actually solve anything in the long-term? As a financial coach, I say absolutely not.
Before I get into this, I want to get something out of the way before I am misunderstood. I am not unsympathetic for those burdened by student loan debt. I am not downplaying the difficulties many people are experiencing right now. I am not shaming people who have student loan debt.
What I am doing is digging below the surface argument of canceling student loan debt to explore what exactly that means, and why it ultimately would not solve the problem.
I want student loan debt gone as much as anyone else, perhaps even more so. What I do not want is a purported solution that is exorbitant in cost and ineffective in getting to the root of the issue; student loan culture.
Student Loan Culture
We have a culture unshakably devoted to the idea that student loans are the only way to pay for school (hint: they’re not, and I’m a testament to that). Part of the reason why student loan debt is so prolific is because the government has fostered the growth of it.
The first real dive into federally insured student loans was in 1958, when the federal government passed the National Defense Education Act. Promising students had opportunities for grants, scholarships, and federally insured loans to go to school as a part of the broader effort to stay ahead of the Soviet Union during the Cold War.
The federal student loan program expanded in 1965 with the Higher Education Act, in 1972 with the Basic Educational Opportunity Grant (Pell Grant), and especially in 1993 when the Student Loan Reform Act. Since 2010, the government has lent directly to students instead of going through private institutions.
From 2006 to 2015, student loan debt grew 152%, $517 billion to $1.3 trillion. It now stands at $1.6 trillion in 2020, and that number continues to grow. Borrowers are defaulting at high levels and lenders are subject to increasing scrutiny.
In spite of these problems, the default position for going to college and graduate school is using student loans. Few other options are on the table in most students’ minds.
Why Not Just Cancel Student Loan Debt?
As a coach, I see three main reasons to avoid this.
- We must take responsibility for our own decisions.
- It is unfair to shift the burden of paying these debts off onto other people.
- The source of the student loan problem remains.
When we sign the line to accept those lines, we accept the corresponding responsibility to pay that money back after we graduate. The fact that our decision catches up with us does not absolve us of the contractual duty to pay back what we borrowed.
The cancel student loan debt movement seeks to sever that duty. It recognizes that student loan debt is a crushing weight for many people, but its solution is not to change habits and behaviors. Instead, it is ultimately more of the same thing.
We cannot fix our financial problems by delegating responsibility for our decisions to other people, especially when those people are disconnected federal bureaucrats. Whether its cars, houses, credit cards, student loans, etc., a distant government is not going to solve what’s going on inside your heart and mind.
I have never had a client fix their financial problems by having someone else do the hard work for them. Instead, I show them how to handle money differently and how to take responsibility for the future.
Only you can fix your financial situation, and one of the critical steps in fixing your situation is to take responsibility for your decisions, past, present, and future.
When we make decisions, we do so with the knowledge (actual or constructive) that there will be consequences. We either actively know or ought to know that anything we do has some effect on the trajectory of our lives. When we make good decisions, we expect to reap the benefits of those decisions. When we make bad decisions, it is only just that we ourselves bear the consequences.
The top 20% of income earners would benefit many times over those in the bottom 20%. Those who have lots of student loan debt also tend to have higher incomes because of their specialized degrees. That means those who opted not to go to college will end up footing the bill for those who did. It’s fundamentally unfair to create such a benefit for those in the upper income brackets at the expense of those in the lowest.
Forcing someone else to bear the load of our bad decisions is fundamentally unjust. Just because the government would use our tax dollars to pay the loans does not sanitize the shifting of our burdens to someone else who did not voluntarily take it on. Other people did not decide to take on student loans for us; we made that decision, for better or worse.
Also think about the fact that our government has racked up over $27 trillion in debt as it is (early 2021). Does anyone actually believe it’s okay to flippantly add another trillion to this unfathomable debt load?
Third, the Source.
Canceling student loan debt would not eliminate the source of the student loan debt: the federally insured student loan program itself.
If you’ve noticed, none of the canceling student loan debt activists demand cancellation of the program. But this is what is driving the astounding increase in college costs, and the subsequently greater student loan offerings.
How does it make sense to demand canceling student loan debt, while not demanding to cancel the program enabling this crisis? It’s intellectually dishonest. It’s like placing someone into an AA program while also giving them money that we know the addict uses at the liquor store.
Colleges have raised their prices of exorbitant rates in the past several decades. The fact that the federal government backs the loans provides an incentive for them to do so. If they raise their prices, they know that the government will just increase the amount of loans available to students. And thus starts the cycle.
As I mentioned at the beginning, I am sympathetic to the plight of many Americans. I have been there myself with student loan debt and was able to get rid of it. I am currently serving my clients and showing them the path to getting rid of their student loans as well, and they are doing it.
The student loan issue is both a systemic and an individual problem. There are structural changes necessary to remove the traps that lenders have set for students, with the approval of the federal government. But we also have a duty to not participate in something that, as a society, we now know to be actively harmful.
We Need a Better Way (And Yes, It Exists)
There are other ways to pay for school, and we have to break out of the mindset that there is no other way. I am doing it right now by paying for a law degree in cash. Believe me when I say it is possible.
If you want to go to school and avoid student loan debt or are feeling trapped by your existing student loans, let’s talk about how you can have the future you want. You may want to consider refinancing, increasing your income, or temporarily changing your lifestyle. Whatever you choose, only a major commitment will get you free from student loan debt.
Book with me now to discover your path to financial freedom!