Those pesky student loan payments

Many remember the Biden plan for cancelling student debt which was struck down by the Supreme Court in July 2023.  

The plan called for forgiving up to $20,000.00 in student debt for some borrowers but not all.  

Fast forward to today, and the ranks of those pushing for debt forgiveness has continued to grow. Of course, once you put an idea in people’s heads that they can get out of their debt, the imagination of how good that would have been never leaves, so of course they continue to push for it. 

After the initial proposal was struck down, Washington tweaked some legalities and moved ahead with at least part of the initiative.

From the Washington Capitol Website February 21, 2024: “Today, President Biden announced the approval of $1.2 billion in student debt cancellation for almost 153,000 borrowers currently enrolled in the Saving on a Valuable Education (SAVE) repayment plan. The Biden-Harris Administration has now approved nearly $138 billion in student debt cancellation for almost 3.9 million borrowers through more than two dozen executive actions……”.

The arguments for and against such loan forgiveness are hotly debated.

Some argue not all student debtors will benefit and is therefore unfair. Others who owe money but did not or will not qualify because of a technicality or are outside the debt limit or time frames are stinging and therefore steaming with resent. 

Still others are against using taxpayer money to forgive the debt of people that knew well and good what they were signing when they promised to pay back what they borrowed. Then there are many that say paying off anyone’s legal debt amounts to fostering an entitlement society that more and more people will take advantage of. This might result in even more petitions for funds from the public purse to cover other costs not related to student debt but to more of life’s costs in general. 

Supporters of the relief programs believe education is a God given right, or at least lean towards the idea that student debt relief leads to the betterment of the society in general by educating more people and then subsequently relieving them of the ongoing burden of that debt so that they will have the funds to support themselves. 

No doubt many of the supporters of such programs owe money themselves. And can you blame them for petitioning to make their debt, or at least some of it, go away for good?

The program included reimbursement to students that were defrauded or otherwise didn’t get what they paid for due to criminal victimization or a bankruptcy of the educational institution. And there are good reasons to at least debate such reimbursements.

At the risk of sounding harsh, I believe in paying your bills, regardless of whatever “good” reason you come up with not to. Your obligation and promise to pay should not be randomly applied to just some loans as one sees fit but to all loans. Car loans, home loans, student loans or whatever. If you signed your name to it, along with that signature, comes your integrity and your promise to pay. 

As for student loans, if you borrowed the money for your education, it is YOUR education after all. 

In this new age of bailouts however, perhaps failing in a big pack like the ranks of the student borrower mentally obscures your identity and somehow helps convince oneself that, under the guise of a “good cause”, that their honor, integrity and word remains intact even though someone else is paying your debt. 

No matter what side of this moral aisle you fall on however, the economics of the issue is a serious one, especially in light of our rampant inflation. Student loan forgiveness will only relieve some people of their obligations, while others won’t get anything. The hook here is that a lot more money will be printed up to pay for it all, and that will mean more inflation for all of us. 

There is no free lunch. Somebody always pays. 

“Watching the markets so you don’t have to”    

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services.Email:[email protected]