I hinted yesterday I would like to comment on the executive order issued by President Biden that gives certain student loan borrowers up to $10,000 in debt forgiveness (for individual borrowers who make up to $125,000 and married couples who make less than $250,000 annually).
Not surprisingly, strong opinions have been voiced. What has been surprising, at least to me, is that opposition has come not only from Biden's Republican opponents, but also from his own party.
Of course, there are those who think this is great news. There are some who don't think the president went far enough and would have been happier if the forgiveness had been more in the 50K neighborhood.
As for me, I think it was well-meaning but poorly executed.
First, the fundamental unfairness of it sticks in my craw. What about those of us who did not borrow money for ourselves or our children to go to school? And what about the ones who did, but have already responsibly paid it back?
The unfairness goes beyond that. I heard a good example yesterday of the lawn guy who does not have a college degree but makes a decent living. Through his taxes he is now responsible for repayment of the loan for the guy or gal whose lawn he cuts. Is that a form of income inequality?
And I know, I know, life is not fair. It's something every parent has likely said at one time or another.
But I have a fundamental problem with giving ten thousand dollars to people who signed promissory notes saying they would repay that money.
More important than that, this plan fails to address the basic problem, which is the cost of higher education. It has gotten completely out of hand, and colleges and university officials make an assumption that students are going to get loans, so what they charge has become ridiculous. They should have to bear some responsibility for this "crisis."
I have no problem with reducing debt for those who render some type of service in return. And I have some sympathy for those who got sucked into for-profit "career college" scams and now have thousands of dollars to pay back for worthless pieces of paper (even though those folks also signed promissory notes and should have understood that money would have to be paid back).
But again, handing out money to borrowers who knew what they were doing, and putting that responsibility on taxpayers? Sorry, but not sorry. I can't go along with that.
8 comments:
"More important than that, this plan fails to address the basic problem, which is the cost of higher education."
My thoughts exactly. Also, not talked about very much is the other part of the legislation which I think had huge implications in the cost of college in the future. The rules were changed so that those who borrow money to pay for college, only have to pay it back at a cap of 5% of their income post college and after 20 years, whatever remainder is completely forgiven. Thus their is huge incentive to borrow as much money as possible because payment will be capped and you won't have to pay it all back before it disappears. I fear that colleges will take advantage of this and jack up prices even more knowing that ultimately, taxpayers are on the hook for the amount never paid by the student.
Please excuse my numerous grammatical errors. I really need to review before clicking the Publish button.
This is one of those topics I'm keeping mum about. I've heard adamant arguments from both sides and I honestly think there are rare exceptions to this issue that some folks never consider or even know about. But given the strong opinions I've witnessed, I'm not bringing them up. 🤐
Mortgage: At closing, you know exactly what you will pay back. Interest is calculated monthly. Extra payments pay down principal.
My Mortgage was $135k for a 30-year loan in 2004. Refinanced once for lower interest rates and terms. We made a couple of lump sum principal payments and the house was paid off in 2021. That's 13 years early.
Student Loan: Interest is compounded daily. Extra payments go toward future payments, not to pay down the principal. If you don’t make a monthly payment because you are paid up in advance, your interest is still calculated daily.
I was told if I made my payments on time (I never missed a single payment nor paid late) loan would be paid off in 20 years. I won’t say the college financial aid rep lied to me. What I will say is she probably didn’t understand it herself.
I was also told about the Public Service Forgiveness. Make 10 years of payments and the rest is paid off. Well, when I applied, I was told my loans weren’t eligible.
I borrowed $45,000 in student loans
First 10 years I paid $275/month = $33,000
Next 15 years I paid $550/month = $99,000
1 final lump sum payment = $16,000
Total $148,000
Mortgage $135k paid off in 17 years for a total of $183,000.
Student Loan $45k paid off in 25 years after making a final $16k payment for a total of $148,000.
Yes, you can say everyone should know better, but chances are you wouldn’t have known any better either.
We are told over and over that your way out of poverty is through education. Yet, the poorest, most vulnerable, first-generation college students are just happy to be living their dream and trying their hardest to escape the cycle of poverty.
What the government should do is take every penny people have paid toward interest and apply it to the principal and preferably stop charging interest. This would probably pay off many loans. At the most, the loans should be set up like a mortgage.
Anyone who reads this and doesn’t understand the system is broken doesn’t want to understand.
This is not mine, btw. We did not take out loans. There is something wrong with a system that is set up so that you can pay your monthly payment faithfully and 10 years later, owe more than you borrowed.
Good point, Debby, and I appreciate it. I agree it’s a broken
system. As I said, although Biden’s action reduces the amount some owe, it does not really address the ongoing problem. That’s what frustrates me the most.
I appreciate Debby posting that AND making the statements about poverty. I do know of a case where poverty was the issue. There was never counseling in school (since no one expected certain students to excel enough for college) and no counseling in college, particularly by those overseeing student loans. I can understand how some people (and they're not stupid people at all) didn't truly understand what they were "signing up" for. And yes, many years later they're still in debt.
My grands have and are working their way through college…even with scholarships and working, it is not enough…they did not ask anyone for anything. They did not ask for loan forgiveness…it is a great idea to help others…they have budgeted and sacrificed…they do not have their own cars…they are not wasteful…the price of college is not going away…
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