I Paid Off $112k in Student Debt and Still Support (Some) Loan Forgiveness

Throughout President Obama’s administration, there was a lot of talk about student loan forgiveness. Nothing happened and I eventually ended up paying off all my student loans in 2014. Now with President-elect Biden’s impending administration, more people are talking about student loan forgiveness again. Typically people in my position are opposed to loan forgiveness because it doesn’t seem “fair” that we should have to pay and others don’t. But this isn’t about fairness so much as mercy. I support some loan forgiveness and here’s why.

My Student Loan Debt Story

I often hear stories of young people not understanding debt, and blaming that ignorance as to why they got themselves in holes of thousands or tens of thousands. I had the opposite reaction. When I was young, I also didn’t understand debt, but that made me afraid of it. I thought that if you didn’t pay your credit card bill on time, you would go to jail.

Even though I was afraid of debt, I didn’t let this fear keep me from going to law school. Instead, I did all the right steps to reduce my debt. I saved in advance. I worked part-time and slashed costs while in school. And then I paid my loans off as quickly as I could muster. Though I had heard rumors of loan forgiveness, I didn’t think it was coming for me. And I’m glad I didn’t wait for it.

Other Student Loan Stories

Paying off my loans wasn’t a huge problem for me. My high salary, immigrant self-control, and the short timeframe for “deprivation” made my debt payoff story boring. My story was an indie film. But many other people’s student loan stories are horrors.

Did the people who are in these horror stories make some mistakes? I’m sure they did. But it seems ridiculous that a mistake with student loans should upend your life. We expunge criminal histories for juvenile delinquents; shouldn’t we also consider giving people with youthful mistakes some redemption?

The Myriad Arguments Against Forgiveness

Of course there are arguments about fairness and personal responsibility. Some people were responsible and didn’t go to college or chose a college that was affordable. It doesn’t make sense now to subsidize people going to expensive colleges.

Some people allege that forgiveness should work because teenagers are not mature enough to understand the costs of college. I don’t buy this. Even teenagers can understand the cost of college. A teenager certainly knows the difference between $5 and $500. And if you can’t afford $500, then you can’t afford $50,000. And if you can’t understand this, then maybe college is not the right path for you.

The Strongest Argument Against Forgiveness

The strongest argument in my opinion is that forgiveness can’t take the place of lowering college costs. You can’t forgive some loans without completely mucking up how people think about paying for college.

For instance, even if a family can pay for their kid’s total college costs or if a student won enough scholarships to cover all costs, it would still make sense for them to take out the amount in loans that would be forgiven. That’s free money after all. About 30% of the 20 million current college students don’t take on any debt (6M students). If student loan forgiveness goes to $50,000, then that’s a 300 billion dollar shortfall into higher education as each of these students takes on $50,000. If you are planning to take less than $50,000 in debt, you might as well take the rest of the $50k to help pay off your loans. Again, there is every incentive to take on at least this much debt. And that’s just from people who are actually planning to go to college.

Frankly, if student loan forgiveness went up to $50,000, I would certainly try to figure out how to enroll in a few college classes, take out the max loans, and then have them forgiven. Who wouldn’t want a free $50,000 (and the opportunity to learn some new skills)? And then when that happens, we lose trillions of dollars. And that money goes straight from higher education to the rich.

The Arguments for Forgiveness

Despite believing many of the arguments above, I still support some loan forgiveness. No one really argues with the financial argument I make in my article, college is not worth the cost. But they fight with the idea still the same. It’s hard to wrap your mind against such a popular ingrained opinion – that college is an absolute good. The messaging around college has been so strong that people can’t comprehend that it could be wrong or that they should change their opinion.

I don’t think people should be blamed for this. You see everyone else doing it and the “experts” are telling you to do it. I was shepherded under these same guidelines and never questioned it. But my parents had saved for my tuition. I was lucky that I was insulated from my ignorance. But many people weren’t.

The Argument for Supporting (Some) Loan Forgiveness

It’s extremely difficult to make it on a low-salary these days, and student loans are a heavy stone around these people’s necks. Yes, it’s possible to side-hustle and get pay raises, and live frugally. But the stress of being poor makes all these decisions so much harder. Yes some people can rise above it, but not everyone can.

I was convinced by this WSJ article recommending forgiving $5,000 in student loans. The most distressed borrowers were those who owed about this much and didn’t get the bump in salary associated with a college degree (usually because they never graduated). It would allow these people to get a new start on life. Plus these are the borrowers most likely to default.

Plus it’s not enough money to trigger anyone’s “no fair” reaction.

Conclusion – Why I Support Some Loan Forgiveness

I don’t necessarily believe in fairness. Life is unfair. But I think personal finance is a field strong in the belief in second chances. So many people start out in the hole, learn a bit, and climb out.

But some people are having tremendous trouble just making it to $0 – just getting to the starting line. I think one-time $5,000 student loan forgiveness is a relatively small cost and will have a huge impact on many people without too many negative externalities. That’s why I support some loan forgiveness.