Student Debt

Revision #3

Updated 2/21/24

I went to college in the late 70’s. To pay for college I worked every summer, Christmas holidays, part-time during school, and borrowed money from our local bank. When I graduated, I immediately started work. My student debt was paid off in about 6 years. The money I borrowed was a great investment for me.

Now- Biden has proposed to use taxpayer money to “forgive” $10,000 and $20,000 of student debt. His proposal is insane and destructive for the US economy. Remember, student debt has been “paused” since March 2020. That’s 31 months!!! An average payment of $250/month of student debt, over 31 months is $7,750 or 25% of their loan. Currently, 44 million people have student loans, with the “pause” of $7,750 each, that’s $3.5 billion fueling inflation in the US. I wonder what they are spending money on. Based on my own observations at airports, many are traveling to the Caribbean.

The average student debt today is $30,000, a good investment over a lifetime of earnings. And recent interest rates are the lowest in 70 years. There should not be a problem paying back that amount over 10 years, especially for an individual making $125,00/ year or $250,000 for a married couple. Those are the thresholds Biden has proposed. Can you imagine a couple making $250,000 complaining that they cannot afford a $250/month loan payment? At $250,000 of annual income, a $250 loan payment equals 1% of their monthly earnings.

Over 50% of the total, current student loan debt is for individuals that attended medical school or law school.

Low-income students often receive Pells Grants of $6,000 to $7,000 a year. That money is tax free and does not have to be paid back. Over 4 years, that amounts to $24,000 to $28,000. Biden has offered these people $20,000 in loan forgiveness. So-$24,000 in Pells, plus $20,000 in loan forgiveness equals $44,000. That’s a lot of money provided by taxpayers!!!

A college graduate’s starting pay is often $50,000 annually and over 10 years their pay increases to $75,000 to $80,000. But—there are problems to my calculations. Here are the problems:

-Many students take 5-6 years to graduate and borrow money each year. Students change majors, fail classes, drop out, and take semesters off. State universities cost about $18,000 to $20,000/per year. Much less if students live at home. These are individual decisions or choices leading to debt. During these years, these “students” live good.

-Students select majors with no link to good paying jobs. Some of those majors include Gender studies, Social Justice, Equality, Equity, Communications, Psychology, African Studies, etc. I even saw a major called “High School Football Coaching”.

-About 35% of recent college students do not work in the summers. They take a break from the pressures of study, and they live on borrowed money. Many recent college graduates elect to take a “gap year” after graduation. They want to figure out what they want to do. They do not have to immediately start work; they have borrowed money. If they did work for a year, the earnings for that year would exceed their loans. DUH!

-Young people, Gen Zer’s have the lowest labor participation rate of any age group in the US. Currently, 3 of 10 do not work. Many live at home. Many are playing video games. The job search websites like Glassdoor, Monster, Indeed, and Career Builder all report a dramatic drop in search activity when a new version of “Call of Duty” arrives.

-Many students elect to attend private colleges with tuition costs 50% to !00% higher than public universities. Instead of paying $18,000 year and commuting, many students move away from home and pay $30,000 to $50,000/year to attend private schools. Their choice. Howard University, a private HBCU, located in Washington, DC costs $48,000/year according to their website. Va. Tech, located about 4 hours south costs $26,000/year and is nationally ranked.

-Many students do not graduate. They quit or flunk out. But they still owe the money they borrowed. Most should not have attended to begin with. They made a bad decision.

Why should taxpayers bail out these students? What about the students that paid off student debt? What about families that saved money for college?

Student debt “forgiveness” is a horrible idea and bad for the US economy!