It’s understandable why there is a strong sentiment to cancel student loan debt. And this idea is growing in popularity, especially with the extended payment pause. 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. And I am not shaming people who have student loan debt.
What I’m doing is digging below the surface argument of canceling student loan debt. I want 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
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).
Student loan debt is so prolific is because the government has actively fostered student loan culture.
The first real dive into federally insured student loans was in 1958. That year, the federal government passed the National Defense Education Act. Promising students had opportunities for grants, scholarships, and federally insured loans to go to school. This was 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. It expanded again in 1972 with the Basic Educational Opportunity Grant (Pell Grant). And it expanded again 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.
First, Responsibility.
When we sign the line to accept those lines, we accept the responsibility to pay that money back after graduating. The fact that our decision catches up with us does not absolve us of the this duty.
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.
No matte the issue, a distant government is not going to solve what’s going on inside the 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.
Second, Unfairness.
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 tax dollars does not sanitize shifting our financial burdens onto someone else.
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 he federally insured student loan program itself is what needs to go.
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 an end to the program that caused it? It’s intellectually dishonest.
It’s like placing someone into AA and then giving money that he or she just uses to drink.
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 goes 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.
If the government were to just cancel this student loan debt, the system itself is still in place. And more students would just go into debt for often unused degrees.
The student loan issue is both a systemic and an individual problem. We need to dismantle the student loan industrial complex. But we also need to individually refuse participate in something that we now know is actively harmful.
Final Thoughts on Canceling Student Loan Debt
There are other ways to pay for school. 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.
You can get a degree and avoid copious amounts of student loan debt. You can be free of the weight that six-figures of student loan debt brings. And it doesn’t require the offloading of the burden through a student loan cancellation program.
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 your free Discovery Session with me now to start your path to financial freedom!
