Why I don’t endorse student loan forgiveness

Are you telling me you want to exempt and forgive people from paying student loans that they consciously got into of their very own volition.

Have you ever heard the phrase necessity is the mother of invention.

In plain English that means if you need it you will figure out a solution.

As a person who just recently conquered student debt  I have to ask myself, Why is this topic even on the table?

The truth is the real problem is that so much money is being borrowed so let address the real issue not the symptom. People being way in debt is not the cause of the problem it’s the result. The real problem is that students go into college not really understanding how money works and what it will all look like when they get out.

Oh and they accept defeat. As in ” School is so high cost I can’t possibly get an education with out going so into debt that my brain will explode.  But hey, a degree is important it doesn’t really matter in what I just need one.  After all its the only way to get a job”

So instead of being reactive, lets get some stuff in place to prevent the problem in the first place. 

Simple rules I never heard of before college but that every student should know before picking their degree.

Before you get into DEBT 

• Don’t get into more debt then your degrees starting salary. So, know what your degree is actually worth, not just the sticker price.
• Work during school, to pay for school(work study or better yet attend a school where working is part of the graduation requirement, I did and made 15/hr right out of high school in my field of study)
• Apply for scholarships merit or other.  There are scholarships out there for so many things not all based on GPA. It takes time but you can find them, ” I got a scholarship for 12k a year just for being from California, no joke”
• Realize the cost of every hr of class, Don’t retake classes. Seriously I was not the best student and retook quite a few classes. IT COST ME DEARLY. In my last year of school, the extra one I had to take due to my lack of focus , I about doubled my debt, I owed 26K and jumped all the way up to 46K in one year. Bye bye scholarship only good for 4 years.
• Don’t ignore the schools that pay you to go. Your financial aid package should definitely be one of the determining factors for where you study.
• Student loans are not for buying cars ( seriously I saw a shirt in college that said Sallie Mae paid for my car, I was like what does that mean? Oh that they borrowed money to buy a car. Really what the F? )
• Most all college/universities have free extracurricular activities for enrichment and entertainment purposes. Plan to use them.

After you are in DEBT

• After you graduate keep living like a college student.
• You can deduct some interest in your taxes if you make less then a certain amount so, Use the tax refund you get on interest, to pay the principle . Sorry no fun money.
• Pay highest interest rate first.
• Watch your balance like a hawk call the provider, suffer the long wait to make sure any extra money goes to the principle
• Use the grace period to pay down principle. 
• Pay interest if you can during school. ( some loans accumulate interest during schooling some don’t) This prevents it from capitalizing and having your interest earn interest.
• Max out subsidized loans first
• Realize that debt is bad!! It doesn’t matter if it’s for coffee or university  most debt means interest, and interest means you are paying (giving away) extra money. The sooner you pay it off the less interest you will pay over all.
• Get your priorities straight.

Lets take a look at the first bullet point.  Don’t borrow more then your starting salary. Let look at a really over simplified chart.

In this chart we just looked at the numbers, if you borrow more then your starting salary you are already extending the payment years, because you couldn’t even cover it with all your new fancy salary. This chart doesn’t even take into consideration interest, add that in and you’ll get a really ugly picture for people who over borrow.

 Now let say you can save half, much more realistic well it will take you 4 yrs to pay it off if you borrow more then your starting salary. Now if it was less then your yearly salary it would take 2 yr to pay off saving half the income.

What message are you sending?

All this is asking is learn to pay your bills. Create good habits.

I recently read an article where the question was I’m drowning in so much debt I feel like I’ll never be able to buy a car or house..hmm lets see if you can’t pay off $ 500 a month what makes you think your ready for a $ 2000 a month house payment? Clearly this pain you feel is a red flag, but the lesson to learn is not how do I get out of the obligation, it’s how do I learn to manage my money better. Oh and it also means, yeah you can’t afford to buy that truck and house yet since you can’t pay off a debt 1/10 as big.

Sorry the truth hurts.

So I say let people learn how to manage their money now and look at the long term impact of their decisions so that you don’t train people to think its ok to borrow more then you can payback. Who knows maybe this will translate to all their purchases and we won’t have people who can’t even save 20% down for a house, maxing out the
limit of what they can borrow and later filing for bankruptcy ….(A Utopian financially literate world…HEY, I can DREAM can’t I)

With all these tips why should we forgive student debt . You got into it knowingly it’s just another bill.

But just for another visual I ran some more numbers

In the above chart we have different debt situations but the message its trying to convey is how much bigger your minimum payment can get. It also shows how just adding a few more dollars to your payment reduces your term sentence and saves you lots on interest. Sure its not taking into consideration if you have children or just bought a house or new car. But if you follow the rule about not borrowing more then you make the alternative payment plan is reasonable. We were able to set aside $1480 per month for our student debt and that still included $400  of fun money in our budget.

I say start holding people accountable for their decisions specially if they are fabricated problems. As in you can spend $100 a week on a bar tab but you can’t scrape together the $300 a month to pay of some principle to your loan. ( If your sharp you noticed that $100 a week equals $400 a month and you could redirect that fun money to your job of paying off that loan money). Or if you are going on international vacations or any other unnecessary spending when you have a financial obligation. 

Do you know a high school graduate who is about to transition to the real world. Pass them the advice and set them up for success
It’s true that you can lead a horse to water but you can’t make it drink . But if you put a bunch of financial puddles around them you can at least hope they’ll get their feet wet.

What do you think? Do most people have a valid reason for needing their student loans forgiven?

– The Roamer

If you want to read more of my student loan debt pay off read my article University Debt Freedom.