Responding to recent articles in The Star regarding student loans and proposals to “forgive” the same, a review of facts is in order.
First, it’s crucial to understand that student loans are used by the majority of students for purposes other than tuition and books. Permissible uses of student loans under applicable regulations include housing (both on-campus room and board and off-campus housing and utilities), transportation (oftentimes car payments and gas – not just bus fare), equipment and devices (including in many cases the latest Apple products), personal supplies, including toiletries and medication, housing supplies (including linens, a microwave and dishes), groceries, care for dependents, fees for professional testing, licensing and certificates, and study abroad program costs.
Admittedly, my descriptions of some of the items above are indicative of my opinion on the matter. However, having overborrowed and long since paid off my student loans, I speak from experience and can confirm that for some borrowers attending public universities and public graduate schools, many dollars are spent on costs other than books and tuition. Would I have been wiser to work more hours and spend less on extracurriculars? Probably so. Did I (a) enjoy myself along the way, and (b) learn to be more responsible as a result? Absolutely. Did I enjoy paying off the loans which resulted from my profligate spending? Nope. However, and this is something Mr. Tripp misses in his recent article, I signed a promissory note. I gave my word that I’d repay my debt, so I did so. This isn’t a complicated concept.
Also important is an understanding of just who owes student loans in this country. An August 2020 article in The Business Insider succinctly presents the facts on this front, and they are telling. The vast majority of student loans in this country are owed by borrowers making over $52,000 per year, with the largest balances being owed by people making over $173,000 annually (average debt of over $46,000). On average, the largest loan balances are owed by borrowers who went to school the longest and now have the highest incomes.
This is hardly inequitable or offensive. Rather, this makes perfect sense. You borrow more money to stay in school for more years and end up entering a profession where you make considerably more money. However, it would only take about $480 per month to pay off a debt of $50,000 over 10 years at currently applicable student loan interest rates. Tell me again how that is an unfair obligation for someone making $173,000-plus per year, particularly if the initial payments are capped at a lower level – say $100 per month – while amortization schedules are stretched out to reduce payments to closer to $300 per month or less.
The following is some relevant data from the article.
Those at an income level of under $27,000 per year, have an average student debt balance of $26,000, while those at an income of between $27,001 to $52,000 per year, have an average student debt of $34,200. Those make between $52,001 and $97,000 annually, have an average student debt of $34,700. Those with annual incomes between $97,001 and $173,000 have an average student debt of $41,200, while those making more than $173,000 have an average student debt of $46,700.
Undeniably, student loan repayment flexibility ought to be the subject of a robust, continuing conversation. Most would agree that graduated payment plans, like the one which was available to me when I began paying off my loans, ought to be available for borrowers. Many folks would agree that borrowers earning less than a certain amount per year ought to be permitted to cap pay interest only on their loan balances until their income exceeds a certain level. As we all know, most people earn more as they progress through their working years, such that payments are less burdensome when deferred into the future.
Finally, our federal government (that’s us) is well over $28 trillion ($28,000,000,000,000) in debt. For every citizen, that’s about $70,000, and for every taxpaying member of the workforce, that’s just north of $180,000. Accordingly, I respectfully disagree with the suggestion that nobody will miss the money if the Treasury goes about dousing borrowers with buckets of money via “forgiveness.”
It’s inconceivable to me that folks are able to consider the notion of going deeper in debt as a country – and that’s what we do if we don’t insist obligations to the Treasury be repaid – when we are in this much of a debt pickle. I don’t think anyone is going to be forgiving the debts owed by the federal government, or am I just ill-informed?
Former student loan debtor and holder of multiple financed degrees
Port St. Joe