The Guaranteed Student Loan

I devoted a substantial portion of my working life meeting the needs of a Fortune 500 company. Reaching a point of a standoff regarding my salary dispute (I felt my compensation should be higher – they disagreed), I took my frustration to the corporate web page and sought out ways to receive the compensation I deserved. My solution was to avail myself of the tuition reimbursement program. This was a very generous 90 percent reimbursement of tuition and books. In fact, as I would be attending an on-line university, they were even willing to reimburse my internet costs. But I digress. I applied for this with the only intent of using the request as leverage. Surely, they would prefer to give me what I was asking in salary as opposed to shelling out $12,500 per year for tuition.

WRONG! MY salary came from local funds whereas the tuition reimbursement came from corporate funds. They signed faster than I could say, “Holy Cow!”

Four years later, after earning both an associate and bachelor’s degree courtesy of their benevolence, I requested a continuation of my schooling to earn a master’s degree. I will never forget what their response, “No. We don’t think you’ll use it.” 

My newly garnered momentum was not to be defused. I proceeded with the help of a student loan. I completed my degree and began repayment six months after graduation.

What was originally a ten-year note evolved to eleven. But I completed the repayment. Yes, there was interest and yes, that year forbearance added additional interest to the note. My loan was paid in full. Repayment of that note lasted longer than my remaining tenure with that job. All worth it overall. Yes, it was worth it.

Now on to my focus of today’s topic: Student Loan Forgiveness.

I have read the details of this program which I share with you now:

The debt relief announced today is broken down into the following categories:

• $5.2 billion for 66,900 borrowers through fixes to PSLF: The Administration has now approved $68 billion in forgiveness for more than 942,000 borrowers through PSLF.
• $613 million for 54,300 borrowers through the SAVE Plan: This relief will go to borrowers enrolled in the SAVE Plan who had smaller loans for their postsecondary studies. Borrowers can receive relief after at least 10 years of payments if they originally borrowed $12,000 or less. Each additional $1,000 in borrowing adds 12 more months until forgiveness. All borrowers on the SAVE Plan receive forgiveness after 20 or 25 years, depending on whether they have loans for graduate school. The benefit is based upon the original principal balance of all Federal loans borrowed to attend school, not what a borrower currently owes or the amount of an individual loan. Today’s announcement brings total relief approved under the SAVE Plan to $5.5 billion for 414,000 borrowers.
• $1.9 billion for 39,200 borrowers through administrative adjustments to IDR payment counts. These adjustments have brought borrowers closer to forgiveness and address longstanding concerns with the misuse of forbearance by loan servicers. Including today’s announcement, the Biden-Harris Administration has now approved $51.0 billion in IDR relief for more than one million borrowers.

“Another 160,000 borrowers and their families will get some much-needed relief thanks to the continued efforts the Biden-Harris Administration to fix the broken student loan system,” said U.S. Under Secretary of Education James Kvaal. “We congratulate those borrowers on their due forgiveness, and we will continue to work to deliver relief to others.” (US Dept of Education, 2024)

In another search, I found this:

THE SOCIAL AND ECO­NOM­IC IMPACT OF THE STU­DENT LOAN DEBT CRISIS

Unpaid stu­dent loan debt can have wide-rang­ing con­se­quences. The bur­den of debt leaves indi­vid­u­als and house­holds more vul­ner­a­ble to oth­er kinds of debt, such as med­ical expens­es, and less able to gen­er­ate wealth. This in turn slows eco­nom­ic growth, as those who car­ry debt are less able to spend mon­ey or pur­chase major assets, such as a home or automobile. 

Stu­dent debt can also neg­a­tive­ly impact the borrower’s:

• men­tal health. 
• abil­i­ty to build retire­ment savings. 
• abil­i­ty to accu­mu­late emer­gency sav­ings; and 
• deci­sion to start a family. 

So, billions of dollars have been spent to eliminate the negative impact of debt on the students who borrowed?

This is going to sound like sour grapes, but I disagree with this. Let me tell you why:

A proverbial wand has been waved over the heads of hundreds of thousands of borrowers to alleviate the burden of their repayment obligations. Those same individuals who are now free to take on car payments, mortgages, etc. and while grateful as they may be, in the back of at least half of their minds is now the notion (courtesy of our administrative powers) that other incurred debt may someday be magically eliminated with the stroke of a pen.

Stephen Covey wrote the Seven Habits of Highly Effective People. One of them is to Begin with the End in Mind. Smart man, Stephen Covey. How about this for a solution:  Re-negotiate the terms of the loans with the lending institutions to drive the cost of the interest down and extend the terms longer so that they payments are not so ominous? Mandate that interest rates do not climb to unrealistic levels. Now we are restoring the integrity of the system itself and providing relief to those borrowers who have fallen victim to a system run amuck?

In short – why are the lenders always protected from repeating their bad acts?

Are you in favor of this? Feel free to get your R-O-A-R on!

References:

The Annie E Casey Foundation, retrieved from the world wide web on July 6, 2024 from https://www.aecf.org/blog/solutions-to-the-student-debt-crisis-in-a-time-of-economic-distress

US Dept of Education, retrieved from the world wide web on July 6, 2024 from https://www.ed.gov/news/press-releases/biden-harris-administration-announces-additional-77-billion-approved-student-debt-relief-160000-borrowers