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Student Debt Crisis – Just Pay it off Already?

Biden has said he will cancel student debt on day one. He won’t of course but there is a reason he is saying he will. Pelosi, Warren, many of the Democrats, have said this. Searching Google for Republicans who want to cancel the debt retrieves the results you would expect, a few unknown Republicans. 

 Biden - cancel student debt day one

Maybe the student debt crisis isn’t a matter of republican vs democrat, conservative vs progressive or left vs right. Perhaps it has become (the argument goes) a matter of – the boat is sinking – start bailing or we are all going to sink. 

Is it really a crisis?

That is really a question we have to ask. Is this a crisis and what makes it one? Like many words that get sucked into the political realm, meanings become fast and loose. In the case of student debt though, I do think the standard definitions fit. A time of intense difficulty, trouble or danger. A time when a difficult or important decision must be made. A turning point with important consequences associated with it. 

While I think we can agree that this debt can represent a personal crisis for those who have the debt it is a little harder to figure out if this is a national crisis. Some figures help with that (Miles Klee, 2020).

  • 45 million Americans owe over $1.7 trillion in student loan debt
  • It’s more money owed than for credit cards and auto loans.
  • It’s more than double the amount the U.S. allocates to the Defense Department and military forces each year.
  • Preventing people from buying homes. 
  • Dissuading people from getting married. 
  • Causing stress, poor health, and increased suicidality. 

If those things are true – and they are – then it does seem as if this is something that impacts us all. 

What if we thought about other debt this same way?

That is a fair question. The answer, I think, is that we already do think of other debt this same way. It’s just that we push the burden of assuming it onto businesses rather than individual tax payers. Bankruptcy laws act in much the same respect as the discussion takes us on student loan debt. You cannot pay so some or all of your debt is “forgiven”. Of course there isn’t really any forgiveness but rather a business just having to eat the cost of the debt you cannot pay. 

Right now, when it comes to chapter 7 bankruptcy, student loan debt isn’t included as a debt that can be discharged, along with taxes, mortgages, and a few other things. However, it would not require much (a law) to change that. These items are not sacrosanct. 

Agree or not, it is a fact that we do have laws that allow a person to discharge some of their existing debt already. Meaning it is a notion we are at least somewhat willing to accept. We frown on it and it ruins  your credit, but when you are in dire straits, that isn’t very important. Fact is – you are likely better off with bad credit after discharging crushing debt. 

I have fallen into the “personal responsibility” camp when it comes to student loans. If you make the deal to pay, you pay.

Pay your debt

I won’t say that people graduate with a “worthless degree”. There isn’t a promise that you will get a job so if you don’t that doesn’t mean your degree is worthless. It just means you have knowledge in your head you aren’t getting paid to pull back out again. But that isn’t what you paid the college/university for. You paid them to put the knowledge in there. If they do that, they have given you what you paid for. Because I think this way I have always had trouble with the “worthless degree” as a valid reason universities should “give the money back”. 

That said – I read an article about the student load crisis that brings up a fairly good argument for using taxpayer money to pay off the loans. Not a great argument. Not one I am saying I agree with. Rather it is one that I will think about more. It reads, “Before you even start to consider the deceptiveness of lending practices, the value of a college education or the capitalist standards of financial responsibility, you should acknowledge what an immense drag that is on the health and stability of our nation.”

starting with debt

Basically, the argument is, the loan debt is so massive, so great, that it is a danger, not to the individuals, but to the nation as a whole.

In order to protect the nation from the devastating, eventual outcome, of the debt we must spread it around to others who didn’t ask for it. We do this too, as a nation with other things. We spread around the funding for things that will make our nation more stable and secure in the long run.

My issue – as you can imagine – is how this:

  1. takes away personal responsibility
  2. puts a burden on someone who didn’t ask for it
  3. allows the cost of universities to continue to rise while providing low quality products.

The argument is – if we don’t do all that – our economy will suffer, generations will suffer. People aren’t getting married, aren’t buying homes, aren’t buying cars, why? because of the mighty debt they have from school and a job with a salary not commensurate with the debt accrued to obtain it. If we manage it now, plan for it, then we can avoid the economic depression that would inevitably follow mass defaults. We could avoid the nationwide impact that we felt as a result of the subprime mortgage crisis. The student loan crisis exists for much the same reason as the subprime mortgage crisis by the way. Student debt, very much is, subprime lending. We could be headed for a world-wide recession as a result. 

Could?

That remains the difficult part for me. You humans are terrible at predicting the future. So what is to say the collapse will actually come? Nothing but an educated guess really. That means the question remains for me – is a maybe enough? As of this moment I don’t know the answer to that. What I do know is that my absolute “you took the loan, you pay the loan, tough titties” attitude has softened a little and I at least ponder another route. I remain very unconvinced though. What about you? 

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