You are forgiven...sort of. Thoughts on Student Loan Forgiveness
Word comes from Washington today that President Biden will announce some level of Student Loan Forgiveness. I’ve listed the high-level details at the end of this post. There are lots of opinions and takes floating around out there on it. I believe that systems lead us to outcomes and in order to have better outcomes, we need to do more to improve the system. Specifically, here is where I think we could improve the current system rather than a simple one-time forgiveness:
Limit the availability of student loan dollars to schools that have an Estimated Cost of Attendance below a specific threshold. Perhaps $60,000 is a good number. This would begin to provide downward pressure on costs. Looking at you, NYU, USC and others…
Student loans are among the toughest to discharge, in many cases they are settled only at death. Let’s provide some method for these to be discharged, at least partially, through bankruptcy. Provide some level of recourse to the college that enrolled the student so that there is some thought as to levels of debt for the students they admit.
Both of these will have the effect of reducing prices and providing some level of recourse, as well as reflection before lending or admitting students to degree programs that have limited chances of career success.
Speaking of career success, let’s change the narrative on what life and employment look like post-high school. We hype up college as a universal solution, lend to students that really don’t understand debt, then see many of them fail. And there are ripple effects. When you read articles of retirees living in poverty, you often see:
Parent co-signs loans
Child doesn’t finish school for a variety of reasons and is underemployed.
Parent has a health problem or middle-age underemployment.
Normalize having kids go to a vocational school while also receiving basic entrepreneurial/management training in accounting, marketing, etc. so they can start their own company. As well, normalize spending the first two years at home taking general electives online in order to bring down the cost. Let’s frame college as something that not everyone should do and not everyone should skip!
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Dave Pedersen is an Advice Only Financial Planner. Based in Hermosa Beach California, he shepherds clients (typically age 40+) through “The Complicated Years”, where they have overlapping goals and need insight from a trained professional. Compensated only for his time and work (and not commissions or management fees), Dave provides true independent insight. Interested? Reach out to discuss further.
