I am very concerned about a student loan bubble that is growing more and more each semester. People are taking out huge loans to get college degrees that, in many cases, don’t qualify them for high paying jobs that would enable them to pay back their loans.
Some young people are making pretty terrible student loan decisions, and now some of those people are demanding a bailout from American taxpayers. While I find it ridiculous to think that taxpayers should be responsible for paying back someone’s student loans, it seems like Barack Obama feels differently.
According to this article, he will be announcing a student loan initiative on Wednesday. The article gives no specifics about the program, so I can’t comment on exactly what he is going to propose.
However, if his proposal takes even one dollar of taxpayer money and uses it to pay off or defer student loans (which I imagine it will), then I hate it. I hate it more than I hate watching Derek Holland and his stupid mustache shut out the Cardinals for 8 and 1/3 innings.
Pay Off Your Own Damn Loans
Why should I, as a taxpayer, be forced to pay off someone else’s student loan debt? Heck, I have my own student loan debt to worry about; I should be allowed to use that money to pay off my own debt!
And what about the people who already paid off their loans? Ninja worked his ass off to pay off his student loans and he’ll be pissed if other people get to just walk away from their obligations. Let’s not forget about the people who worked full time during school and went to class at night, working and going to school for 8-10 years to get a four year degree without any debt? You think those people want their tax dollars to pay for other people’s debt?
A 22 year old who has takes out over $100k in student loan debt to get a degree in engineering or finance is taking a huge risk. If he takes out that much debt for an art history degree, it’s simply irresponsible. We can’t blame taxpayers for irresponsible students; those students need to accept the consequences for themselves.
A Student Loan Program is Not The Answer!
When are people going to realize that more government is not the answer?! Every time government gets involved in something to “help low income people afford it”, it just makes prices skyrocket through the roof for everyone. Don’t believe me?
Housing – Community Reinvestment Act in 1992.
Medical Care – Medicare in 1965, with numerous additions including the Prescription Drug Program in 2003.
Student Loans – Federal Student Loan Program starting in 1965.
The costs of these three things have vastly outpaced inflation ever since the government got involved. It’s really not hard to understand.
When government creates an unlimited amount of easy credit for something, then lots and lots of people are going to buy that something. Thus, the price of that something will shoot through the roof. Now the government needs to extend even more credit to meet demand, which makes the price go higher. More credit, higher prices, more credit, higher prices, etc, etc, etc.
The only way to fix the problem is to get government to stop giving out unlimited credit and stop bailing out people who make bad decisions!
Readers: Where do you stand? Do you think the government should take money from taxpayers and give it to people who have lots of student loans? If so, how do you handle the people who were responsible enough to pay for their college upfront or pay off all their loans?
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
I dont think this is a good idea at all. I had ~30k in student loans when I finished school in 09. my student loan plan wasnt to go while to the government about it, it was to get 2 jobs and work 70+ hours per week. I’ve now got 1 student loan with about 10k left on the balance.
This is not the governments problem, students should know better (though what 18 year old will listen?)
I’m sure you’ve heard the saying “I’m from the government and I’m here to help” you better hold on to your wallet.
Congratulations on doing so well with your student loans. I’m hoping to pay more of mine off in the near future. Maybe we’ll both be student loan debt free soon!
Kevin – I totally agree with you. The government has to stop bailing out people who make stupid decisions. No one bailed me out when I had student loan debt and credit card debt. People need to start taking responsibility with their money and learn to live below their means.
– Jackie
“No one bailed me out when I had student loan debt and credit card debt.”
I wonder how many people saying the government didn’t bail them out for student loan debt are aware that under some circumstances, interest on student loan debt can be deducted even if the taxpayer does not itemize. Sounds like a (partial) bailout to me, and I wonder how many here either took advantage of that provision, or would have if they knew about it.
And despite all the government bashing here, in 1986 Reagan did in fact “stopped bailing out” people with credti card debt when the Tax Reform Act phased out the deduction for credit card interest.
Just because government assistance exists today, or has existed in the past, doesn’t mean it’s a good idea to exist in the future.
Also, you don’t have to believe in a program to use it.
I wish we replaced all tax deductions with simply a lower tax for everyone, but that’s not the reality we live in. I take advantage of the student loan interest deduction (only partially because the government phases out my eligibility at my income level) because it’s my tax money that’s paying for it. I wish it didn’t exist, but since it does, I’d be stupid not to use it.
I will say that I wouldn’t take the benefit if it exceeded the amount I paid in. However, I paid $14k in taxes last year, so I’m pretty sure I already paid for the few hundred that I got in a tax break.
Notwithstanding how much you paid in taxes, you are paying less in tax than you would have were it not for this government “handout.”: And notwithstanding the principles you claim, you are still quite willing to accept the handout; you even say you’d be stupid not to. That being the case, it is every bit as valid for a low-income earner (one of the reviled 47%) to claim such credits as the Earned Income and Child Tax Credits that you identify as handouts in another discussion.
Which is why I take issue with the government giving the handouts and not with the people claiming the credits. Again, I never disparaged the 47%; only express my pride in being one of the top 53% of earners.
And you know how else I would pay less in taxes? If part of my taxes weren’t paying for mortgage interest deductions, student loan interest deductions, and any other deductions that are paid for out of mine and everyone else’s taxes.
I took out student loans for my masters degree. I am aggressively paying them down and would be pretty upset if the government feels the need to “help” the irresponsible. Both my degrees are very marketable (engineering and finance) and I have a job (not my ideal job but it is a job and I’ll jump ship to a better job when one comes along).
I already get to deduct my student loan interest on my taxes what more do I really need? Unless the government decides to make student loans interest free (which is also a bad idea), I don’t really want them to do anything.
I’m very interested to see what Obama comes out with on Wednesday. I don’t think it’s going to be good for the average taxpayer.
What we need is a complete overhaul of the tax system. The government is way too involved and there are too many “entitlement” programs that are being paid for with my tax money. I’d like to keep more of my money not give it away to people who took out student loans. I couldn’t afford to go to my school of choice so I went to Community college first. it’s called making smart financial decisions. People should not borrow with no intenet to pay or be given “forgiveness.”
And, Kevin, you’re right, D. Holland’s moustache is pretty dumb looking, isn’t it?
And what’s worse is they interviewed Holland tonight and he seemed like a funny dude I could be friends with. Not with that ‘stache though.
I worked very hard to pay off my student loans within 3 years of graduating — including taking on an additional part-time job and working a 3rd during the holiday season each year. I’ll be pissed if I have to pay for someone else because they weren’t responsible enough to do it on their own.
I think everyone who has been responsible with their loans will be pissed!
I think it’s terrible too.
I still have student loans left that I have been paying off since 2003, and if anything passes that forces taxpayers to cover human loans, I will still opt to pay off my loans myself.
I just hope that’s an option… And I hope that others will opt out of it too!
That’s a pretty principled stance. If you’re already paying taxes to fund the program, I think you should take advantage of it. If the government is going to force you to financially support the program, you might as well get the benefit.
It is principled, I agree, to a prideful and financially irresponsible degree. I have taken pride in paying off my student loans, and want to see it through to the end!
I also want to be able to maintain my firm stance about the bailout, and reaping the benefits would be contradictory.
I think it’s stupid. As long as we’re running up a huge deficit we can’t afford this.
What I think we need to do is try to temper the education costs that are more than tripling inflation on an annual basis.
Forgiving loan debt that already exists is like trying to unscramble an egg. You can’t do it. Let’s concentrate on what we can do which is figure out how to hold down rising costs.
One thing I think that should happen is that, for these public universities with tens of billions of endowments, there should be caps on endowments to where those could then offset some of the costs.
You mention another great point. We don’t have any extra money in today’s environment, and this is just going to be another program to pile more debt onto the younger generations.
I don’t think there should be caps on endowments; prices will deflate as soon as you get the unlimited credit (aka stafford loans and pell grants) out of the system. Get rid of those, and I guarantee prices will come down.
I completely agree with you! People want these programs established and they never think about how/who pays for it. Why should people that have already paid off student loans, opted to go to a cheaper school, took on 3 jobs, etc., help to pay off student’s who chose to be $150,000 in debt pursuing an area of interest that wasn’t lucrative? It is about smart choices to find a school you can afford, take out the best kinds of student loans at the best rates, and create a budget to pay it back.
I wonder how many of these students that can’t pay it back have DVRs, iPhones, and other such “needs”.
I hope with all my hope that the government does not start paying off people’s student loans. If they do I hope I have enough time to go grab myself some free student loan money right before they start the bailouts. (Just kidding!)
It would be a horrible thing and only punish the responsible and reward the irresponsible.
That’s not a bad idea. If people are going to get bailed out, you may as well take full advantage of it! Maybe I’ll fill out an application tonight!
The harder you work the more you get punished. The lazier you are, or if you just don’t fell like working, the more rewards you get.
I say all of us hard working taxpayers STOP paying tax. Let’s see how the people who get tax money like this. Oh, and what’s the government going to do, arrest all of us? What’s that mr. Government, you’re going to garnish our wages? Well then we quit our jobs and want our welfare checks! We sure hope you have a 50 year emergency fund in place to get us through this tough time.
At some point, people are either going to stop working or move out of this country. That is, unless we start giving everyone (both the hard workers and the not so hard workers) what they deserve.
Can’t say I haven’t thought about moving abroad 🙂 I’m pretty scared for the financial future of this country… hopefully we figure it out otherwise 10 years from now is going to look pretty scary.
I’m having difficulty understanding why so many people are throwing such a big fit over student loans. PF sites are taking a stance that loan forgiveness, of any kind, is evil. People with massive student loan debt are whining that the payments are crippling their finances. I think the system is appropriately flexible.
Why has no one pointed out there are a ton of ways to repay student loans? The student loan system (which I agree needs to be revamped to provide more education than a simple tutorial prior to filling out a Master Promissory Note) offers Standard Repayment Plans to pay loans off in 10 years; Extended Repayment Plans to pay loans off in no more than 25 years; Graduated Repayment Plans where the amount of the payment increases every two years until it’s paid off in 10 years; Income Based Repayment which is based on your income (and spouse’s income if applicable), family size, state and other factors to determine your monthly payment (this gives you 25 years to pay it off and, if you qualify, some of the debt may be canceled); Income Contingent Repayment (Direct Loans only); Income Sensitive Repayment (FFEL Loans only); plus- some universities, graduate schools, public service jobs and government jobs (like the CIA) offer LRAP’s (Loan Repayment Assistance Programs) to help pay your loans. And, of course, there are always deferment and forbearance options.
The options are discussed in detail here- http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp
My wife & I are currently paying back about $100,000 in student loans (undergrad & graduate degrees). We chose the payment option that works for us. If our circumstances change, we can always change the repayment plan we’re on.
This is absolutely ridiculous! Why is the government bailing out the “irresponsible”? No one is bailing out those who REALLY need the help – such the sick and disabled who are up to their necks in medical debt at ZERO fault of their own! I worked very hard to pay off my student loans and save. However, horrible luck has turned me into medical mystery whose life is now a blur of doctor appts…and now debt. No one is helping me out even though being sick is completely out of my control. This makes so mad!
I’m still trying to wrap my brain around a 22-year old being $100K in debt. Shortly before I left college, I remember being astounded by a classmate confessing that she was $27K in debt. I thought it was an incredible, insurmountable amount.
I’m not an advocate to bailing anyone out; kids need to understand what they’re getting into when they borrow massive amounts. However, it’s worth pointing out that we had massive bailouts for gigantic companies, but gave the little guy no equivalent, even John McCain will admit that.
I agree with you Kevin. Instead of bailing out “irresponsible” people, the government should “incentivate” responsible people who already paid off their student loans. Why? Because forgiving the loan of one people is giving the wrong message and it’s just a temporary “solution”. I bet that people who get their loans forgiven, is just going to take more loan, and continue to waste money in the same irresponsible way.
What we need is to take control of our own lives and work for what we want, and not expect the government is going to solve all our problems. The loan bubble is just going to explode us in our faces, just like the real state bubble did back in 2007/8.
Sorry if I misspelled something. English isn’t my native language. 😛
You know what thousandaire, I like your style. The way I see it, there are four reasons why college education prices are going up so much so fast
1. Universities know the government will keep giving people more and more money to go to college if the tuition goes up… so they raise tuition.
2. We keep telling our youth that the “only way” to success is a college education, so more and more people think they have to go if they want to be successfull.
3. We treat 20-somethings as childern, assuming parents (who likely have more money than their kids) should pay the bill for education
4. People keep paying the high tuition – even when all they get is a useless degree from some diploma mill.
I agree you you. Pay off your own damn loans!
I know I’m late to the game, but I just wanted to jump in and play Devil’s Advocate here. I don’t disagree with you Kevin, and I WOULD be pissed if all student loans were forgiven, BUT, I think there are some serious systemic problems with the whole process that need to be addressed: Namely, why the heck are a bunch of 17- and 18-year-old kids allowed to take out such loans?
If I decided (at almost 25-years-old) that I wanted to really enhance my Beanie Baby collection, and went to the bank for a $10,000 loan to do it, they would absolutely look at me (with my adultness and my full-time job and my clean credit score) and tell me to my face that that’s a really fucking stupid investment, and I wouldn’t get it.
BUT a 17-year-old with no job, no money, no credit score wants to take out $100,000 to get an art history degree, and the bank is all for it? Why aren’t people sitting these kids down and saying, “OK, look, you want that degree? Your starting salary will probably be about $25,000, so you can NOT go six figures into debt for it. And if you do, this is what your loan payment will be relative to your take-home income. Are you OK with that?” and why the heck aren’t banks refusing to grant loans to students who won’t be able to manage to pay them back without struggling for the next decade. I’m all for personal responsibility, but this is criminal.
As much as it would be unfair to offer relief, I don’t think it would be the worst idea if it got the economy back on track, but ONLY if there was some serious reform going forward in the way loans are dolled out, so that no one can ever, EVER get themselves into that much student debt ever again. The problem with all the government bail outs was that it was just a hunk of money given to these big companies, and no expectation that they change the practices that got them into trouble in the first place.
Because as much as the idea of your tax dollars going to someone else’s student loans suck, an entire generation of people struggling under the weight of student loans will do nothing to solve the problems the economy is facing.
You have a beanie baby collection?! 🙂
You hit the nail on the head. As long as the federal government guarantees loans are available to everyone, no matter how creditworthy they are, no matter if they actually finish college, and no matter what they major in, then college will be outrageously expensive. Get rid of federal student loans, and watch how cheap college becomes.
And I understand your concern, but it’s not my fault to some kid was stupid enough to take out $100k for an Art History degree. He needs to live with the consequences of his decision. Making me and other taxpayers live with the consequences of his decision isn’t going to solve anything. It’ll just make him be more reckless with his borrowing and spending until we have to bail him out again.