I’m Sorry. It’s your debt, why should I pay it?

The Push for Student Loan Forgiveness

Thanks to Ed Wilson, Steve Robertson and www.myhorrynews.com for the above graphic

Currently there is a big push in this country (the Good Ole USA) to forgive all student loans. Part of this nonsense has already been approved in Washington DC (at least by Uncle Joe) and you can read the entire article here …

However, since I will be quoting a lot of this in the article you’re currently reading … you may just want to finish this one first.

According to aplu.org: College-educated workers enjoy a substantial earnings premium. On an annual basis, median earnings for bachelor’s degree holders are $36,000 or 84 percent higher than those whose highest degree is a high school diploma. The earnings gap between college graduates and those with less education continues to widen.

I also found this in a recent Forbes article: According to a new report from the Georgetown University Center on Education and the Workforce (CEW), adults with a bachelor’s degree earn an average of $2.8 million during their careers, $1.2 million more than the median for workers with a high school diploma. In addition, at every additional level of education, workers tend to earn more than those with less education. Forbes Article here.

This was stated in a recent NASDAQ.com article: Typical young workers with college degrees now out earn their high-school-graduate counterparts by a record-high $22,000 per year. That article is here.

According to new data from the Federal Reserve Bank of New York, the median annual wage for a full-time worker ages 22 to 27 with a high school diploma is $30,000. For a full-time worker with a bachelor’s degree, it’s $52,000. Yes, this is somewhat different than the amounts quoted above by APLU.org.

This difference marks a pay gap of $22,000 — the highest on record with the New York Fed, which tracks earnings going back to 1990.

The findings are part of the new report on recent college graduates. The report also looks at unemployment, underemployment and wages for workers with different college majors.

In terms of median wages, every college major analyzed by the New York Fed out earned the high school diploma. Of course, there are always exceptions, and some whose educations stopped after high school wind up making more money than college grads. A Georgetown University study found that 16% of workers with only a high school diploma earn more than half of workers with bachelor’s degrees.

Overall, though, the return on investment for a college degree is substantial — worth upwards of $800,000 or more in increased earnings over a lifetime.

Perhaps unsurprisingly, the new report shows that some college majors — like those in the STEM fields — fare much better than others in terms of earnings. The difference in earnings among majors highlights a massive income gap of its own.

Here’s some interesting information I was able to pick up at: ValuePenquin.com

The average student debt in the United States is $32,731, while the median student loan debt amount is $17,000. With the rising costs of tuition and total student loan debt up around 302% since 2004.

Fig. 1

Understand this. There is currently over 1.5 Trillion Dollars of student loan debt. While “Uncle Joe” and his cohorts are not able at this time to pass a bill to pay it all off … based on the first article I eluded to (and which I will get back to) they are currently trying to move to forgive it all, though now they are starting with just a portion of it. Remember when they forgive this debt of the debtor currently, they will be creating a debt for the current non-debtor.

Fig. 2

What this chart is telling us is that the largest number of borrowers (the first four columns) actually owe $50,000 or less in student loan debt while the minority (the last five columns) owe the most which is greater than $50,000 and as high as $200,000 or more.

We also find, according to USNews.com that the average student debt has risen by about $4,990 over the past 10 years or about 20% (which would equate to about 2% per year).

Fig. 3

When you consider the cost of college (per educationdata.org) has gone from $12,404 per year to $16,647 per year – an increase of $4,243 or 34.21% over the past ten years – then it appears the amount of loans are actually lagging the increasing cost of college … which is a good thing!

For now let’s get back to Uncle Joe’s White Paper or FACT SHEET as it is called:

NEWS FLASH: I started writing this article just hours before Uncle Joe signed an “Executive Order” to attempt to activate this mess on August 24, 2022. I am still writing as of August 25, 2022.

President Biden (Uncle Joe) believes that a post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. During the campaign, he promised to provide student debt relief. Today, the Biden Administration is following through on that promise and providing families breathing room as they prepare to start re-paying loans after the economic crisis brought on by the pandemic.

Wait just a darn minute here! If it is a fact that college graduates are going to earn more … a lot more … than non college graduates – then just how are they deprived of the opportunity to get a ticket to the so called middle-class life. Many of the people in the middle class do not have a college degree, or a college debt … but they make enough to be considered middle class even while they are making far less than those that have a college degree. This makes no sense to me!

The paper goes on to say … The skyrocketing cumulative federal student loan debt—$1.6 trillion and rising for more than 45 million borrowers—is a significant burden on America’s middle class. Middle-class borrowers struggle with high monthly payments and ballooning balances that make it harder for them to build wealth, like buying homes, putting away money for retirement, and starting small businesses. What High Monthly Payments and What Ballooning Balances?

According to best student loan companies .com … The average interest rate for a student loan is around 5-6% for undergraduate loans, 6-7% for graduate student loans, and 7-8% for parent loans. These really are extremely low rates when compared with loans for something other than education today. In addition, for most student loans that are not paid after 20 years of payments, the loan is forgiven and the outstanding balance is considered “income for tax purposes” in the year the loan is forgiven. So, the only balloon payment I see is the tax on the outstanding balance of the loan after 20 years.

And the paper continues to read … For the most vulnerable borrowers, the effects of debt are even more crushing. Nearly one-third of borrowers have debt but no degree, according to an analysis by the Department of Education of a recent cohort of undergraduates. Many of these students could not complete their degree because the cost of attendance was too high. About 16% of borrowers are in default – including nearly a third of senior citizens with student debt – which can result in the government garnishing a borrower’s wages or lowering a borrower’s credit score. The student debt burden also falls disproportionately on Black borrowers. Twenty years after first enrolling in school, the typical Black borrower who started college in the 1995-96 school year still owed 95% of their original student debt.

Again, I ask, Who’s fault is it that some people borrowed and did not finish college? If it was because the cost of attendance was too high, what is being done about that when we continue to allow our colleges and universities to over-pay non-educational staff and coaches and continue on a year by year bases to increase the cost of attendance at higher than normal inflation rates? Why are we allowing the extremely wealthy and the politicians to donate hundreds of millions if not billions of dollars each year to colleges and universities and take a tax deduction for those institutional charitable contributions if we are going to still allow the institutions to continue to charge far above the value of the education being received. State Colleges and Universities are supposed to be Non-profit organizations but it seems to me that many are generating huge profits.

While it may be true that 16% of the borrowers are in default or that the black borrower who started college in 1995-96 still owes 95% of their original student debt – just how is that the fault of the people who pay their debts on time or the taxpayers who have actually worked hard to stay debt free?

Did you know that the average car loan today, according to coxautoinc.com exceeds $20,000 and the default rate is just 2.9%? Why is that? Because those automobiles can be repossessed. To bad an education cannot be repossessed. In addition, as of December 2021 only 3.4% of home mortgages were in default according to corlogic.com. Again, homes can be repossessed while a college education cannot be. Automobile and home loans are secured loans and educational loans are not secured loans.

Furthermore according to CNBC.com, here’s a break-down of Credit Card Debt delinquency by age group:

Fig. 4

Credit card debt, like college debt, is non-secured so naturally the default rate will be higher (along with the cost to borrow).

When is the “Left Progressives” going to start forgiving this debt in an attempt to purchase more votes on the backs of those of us that keep our debt in check?

So what is Uncle Joe’s three-part plan …

to provide more breathing room to America’s working families as they continue to recover from the strains associated with the COVID-19 pandemic.

And, again, we are blaming the Pandemic. When are we going to start blaming and charging the real culprit – not the legitimate American Taxpayer … but rather the Communist Country of China?

Part 1 of the plan:

The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action.

Let’s not forget that a Pell Grant is not a loan. It is a gift from Uncle Sam and can be as high as $6,495 for the 2021-2022 school year or as low as $650. Eligibility is based on Needs of the family and is not provided if the EFC (Expected Family Contribution) is higher than $5,846 this year. In my opinion, since the Pell Grant is not a student loan, but rather a gift, it should not even be considered in the calculation of the amount of student loan that is going to be forgiven.

We should also keep in mind that if the average student loan is $29,927 and “sweet Uncle Joe” is going to forgive $20,000 of that (assuming you had a Pell grant and earn less than $125,000 per year if single or $250,000 per year if married) – fully 66.83% of your debt will be forgiven at the expense of others who have to pay, or have already paid, or have never had the student debt to pay. This is certainly “wealth transfer” or for a better name … SOCIALISM … at it’s fullest.

Part one continues to read … To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023. However, this is the same thing they said last year. Man, wouldn’t it be nice if non-college grads, or college grads who paid off their debt could have a pause put on other debts they owe because of the infamous COVID-19 Pandemic?

The Department of Education estimates that, among borrowers who are eligible for relief, 21% are 25 years and under and 44% are ages 26-39. More than a third are borrowers age 40 and up, including 5% of borrowers who are senior citizens.

By targeting relief to borrowers with the highest economic need, the Administration’s actions are likely to help narrow the racial wealth gap. Black students are more likely to have to borrow for school and more likely to take out larger loans. Black borrowers are twice as likely to have received Pell Grants compared to their white peers. Other borrowers of color are also more likely than their peers to receive Pell Grants. That is why an Urban Institute study found that debt forgiveness programs targeting those who received Pell Grants while in college will advance racial equity. Before you label me as a Racist for discussing black borrowers – remember this is coming from the White House Fact Sheet.

Fig. 6

The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year. Nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.

Thanks to the American Rescue Plan (another boondoggle) , this debt relief will not be treated as taxable income for the federal income tax purposes. Wow, now this is different … from debt forgiveness considered taxable income to debt forgiveness no longer taxable. Oh, but someone will pay … nothing (but my advice or opinion) is really free.

To help ensure a smooth transition back to repayment, the Department of Education is extending the student loan pause a final time through December 31, 2022. No one with federally-held loans has had to pay a single dollar in loan payments since President Biden took office.

Part 2 of the plan:

Make the student loan system more manageable for current and future borrowers. They plan to do this by …

Cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers. 

Of course there is no explanation as to WHAT is considered DISCRETIONARY Income. In financial planning terms Discretionary Income is defined as the amount of an individual’s income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services. However, it’s calculated differently for Student Loan Repayment purposes.

When it comes to financial aid loan repayments then Discretionary Income is defined as the difference between adjusted gross income (AGI) and 150% of the federal poverty line that corresponds to your family size and the state in which you reside.  I find it interesting that it is worded this way since the Federal Poverty Guideline is the same for 48 of 50 states with only Hawaii and Alaska being different. The table below shows these guidelines.

Fig. 5

Now if your Adjusted Gross Income happens to be say $75,000 per year and you have a family of 4 then your discretionary income for payment repurposes is the difference between $75,000 and $41,625 or $33,375. Prior to Uncle Joe’s sweet deal you would be required to pay 10% of the discretionary income amount, $3,337.50 per year on your student loan or about $278.13 per month. After the deal Uncle Joe has made with the taxpayers (and without the approval of the taxpayers) you are now only required to pay 5% of the discretionary income amount $1,668.75 per year or $139.06 per month.

In addition to this part of the plan will also fix the broken Public Service Loan Forgiveness (PSLF) Program that has been in existence for a long time. I have no idea what is broke about it, nor did the white paper from the White House lead to any clues. I do know, from my experience of consulting with Financial Planning Clients who were planning for College Tuition for their children that debts are supposed to be forgiven for those college graduates who choose to work at a nonprofit (such as a school), in the military, or in federal, state, tribal, or local government. Also as of the information found in the paper more than 175,000 public servants have already had more than $10 Billion in loan forgiveness approved. In understanding this I have to ask why it is that Alexandria Ocasio-Cortez and others like her, are pushing to get their student debts paid for. She’s working for the Government in Congress — seems to me they should already have been waived if she would read the laws and apply for the waiver.

But perhaps that is what Uncle Joe meant by fixing it … making it automatic for those poor politicians who don’t know the law or who don’t know how to read.

When it comes to manipulating the payments on the non-forgiven part of the loan this is what is stated in the White House Briefing (white paper) on the subject.

These reforms would simplify loan repayment and deliver significant savings to low- and middle-income borrowers. For example:

  • A typical single construction worker (making $38,000 a year) with a construction management credential would pay only $31 a month, compared to the $147 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,400.
  • A typical single public school teacher with an undergraduate degree (making $44,000 a year) would pay only $56 a month on their loans, compared to the $197 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,700. Wait a minute … school teachers should have their loans forgiven anyhow based on the Public Service Loan Forgiveness (PSLF) Program that states for those college graduates who choose to work at a nonprofit, in the military, or in federal, state, tribal, or local government. A public school is not only non-profit but it is also a part of local government since the teachers are paid by the state. Seems to me that debts should already be forgiven.
  • A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans, compared to the $295 they pay now under the most recent income-driven repayment plan, for annual savings of more than $2,800.

So what happens when the payment of a debt is lowered? Let’s take a look. Using a hypothetical debt of $25,000 and an interest rate of 7% per year with a discretionary income of $30,000 as defined above for education loan repayments. The current rule is that a person would pay 10% of their discretionary income ($3,000 in this case) and their debt would be paid in 12.5 years shown as follows:

Fig. 6

Since the total interest cost would be $12,629.42 — at $250 per month the debt would be paid in 12.5 years at a total cost of $37,629.42.

However, if we reduce the payment to 5% of the discretionary income amount (that is proposed by Uncle Joe) the debt will never be paid. Of course this is the way the government pays their debts and why they must continue to print money at the expense of us taxpayers.

Think logically folks … not emotionally … when you have a $25,000 debt at 7% interest the interest alone the first month would be this [$25,000 x (.07/12)] = $145.83. If you are only paying $125 per month your debt just increased after the first month from $25,000 to $25,000 + $145.83 – $125.00 = $25,020.83. After month two your debt is now up to $25,041.78 and it will continue to grow. As a matter of fact, after 150 months (12.50 years) this is what your debt would still look like …

Fig. 7

You would have paid $18,750 on a $25,000 debt and would still owe $29,974.23 against that $25,000 debt. That, my friend, is the way Uncle Sweetheart pays his bills.

Part 3 of the plan:

Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices. The President championed the largest increase to Pell Grants in over a decade and one of the largest one-time influxes to colleges and universities. To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free. Meanwhile, colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford. This Administration has already taken key steps to strengthen accountability, including in areas where the previous Administration weakened rules. The Department of Education is announcing new efforts to ensure student borrowers get value for their college costs.

First Question: How in the heck will Community Colleges be free – unless a new line is added to property tax forms for Higher Education School Taxes. I, for one, am already against paying school taxes when I don’t have anymore kids in schools in my area. Now am I going to have to fund community college as well. Perhaps a new tax line will be added to our 1040 form for Federal Taxes … but I doubt that … though I do not doubt that taxes are going to increase substantially. There is no free lunch. Someone is going to have to pay for all this.

Second Question: How can we make colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford, when these “Institutions of Higher Learning” are currently paying sports coaches 10X to 20X more than they are paying their teachers and other staff members. Yea, I know all you athletic fans are going to say, “Football pays for itself at the University of Alabama” or other such schools … but if it does … why are the schools with the best football teams also some of the most expensive in the country? Believe me, there is no College Coach worth a million dollars a year … but there are some making 2 to 8 times that much each and every year … while tuition rates continue to sky rocket.

According to the National Center for Education Statistics, for the 1970-71 academic year, the average in-state tuition and fees for one year at a public non-profit university was $394. By the 2020-21 academic year, that amount jumped to $10,560, an increase of 2,580%. So in 50 years the cost of college increased by a simple average percentage rate of 51.60% per year. Actually that is a compounded rate of 6.8% per year.

During the same 50 years … The dollar had an average inflation rate of 3.99% per year between 1970 and today, producing a cumulative price increase of 663.60%. This means that today’s prices are 7.64 times higher than average prices since 1970, according to the Bureau of Labor Statistics consumer price index. However, college costs are up a whopping 26.8 times since 1970. Just how does Uncle Joe and the Government think they are going to change something that has been going on since the beginning of time. They aren’t. It’s all a ploy to feed you trash while buying more votes.

No, I don’t blame democrats only … Republican’s are also full of lies when it comes to planting rotten seeds to harvest more votes.

Here’s what the paper from the White House has to say about this part of the plan …

While providing this relief to low- and middle-income borrowers, the President is focused on keeping college costs under control. Under this Administration, students have had more money in their pockets to pay for college. The President signed the largest increase to the maximum Pell Grant in over a decade and provided nearly $40 billion to colleges and universities through the American Rescue Plan, much of which was used for emergency student financial aid, allowing students to breathe a little easier.

Additionally, the Department of Education has already taken significant steps to strengthen accountability, so that students are not left with mountains of debt with little payoff. The agency has re-established the enforcement unit in the Office of Federal Student Aid and it is holding accreditors’ feet to the fire. In fact, the Department just withdrew authorization for the accreditor that oversaw schools responsible for some of the worst for-profit scandals. The agency will also propose a rule to hold career programs accountable for leaving their graduates with mountains of debt they cannot repay, a rule the previous Administration repealed. And let’s not forget dear Uncle Joe … they will certainly not be able to pay them if you cut the required monthly payment in half!

Building off of these efforts, the Department of Education is announcing new actions to hold accountable colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes. They also include requesting institutional improvement plans from the worst actors that outline how the colleges with the most concerning debt outcomes intend to bring down debt levels.

QUESTION: Just how is developing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes going to help? Future students have to be willing to read and understand what is out there in order to get the most out of college with the least cost. Unfortunately they are not taught how to do this in most high schools – or even why they should.

I have a daughter who has her PhD in Education from the Florida State University who had very little college costs and no student loans.

Why and How? She was smart enough as a high school student to (a) understand what she wanted in life and (b) was willing to put in the time to apply for and get accepted to many small scholarships. She understood education funding and understood she wanted no part of student loans. And, no, she did not qualify for a minimal Pell Grant. I paid very little for her undergraduate degree. I gave her an old family car and paid for food and some incidentals. The rest was scholarships that she applied for each and every year. When she got married after her first four years at the University of Southern Mississippi she decided to work at Florida State where her husband was attending and much of that Master’s Degree cost and later PhD cost was paid for by the school as part of her benefit package. To this day she is still employed (as is her husband) at Florida State.

Bottom Line – and Why Many are Upset:

No U. S. President has any right to negate any contract signed by any individual and a non-government lending institution – and a loan agreement is a contract. Nor does any president have any right to spend money paid by taxpayers just to fulfill campaign promises. I don’t care if his name is Donald Trump or Joe Biden. The House of Representatives control the United States Purse and only they have the right to direct money from the treasury to other areas of government.

What you are seeing is only the tip of the Iceberg. Uncle Joe just added $300,000,000,000 to the U. S. Deficit and before it is all said and done it could total another 1 Trillion Dollars if the Supreme Court does not step up and declare it unconstitutional – which it is.

I recently saw a Facebook post from a Retired American Corporation CEO that I used to work for. I will not mention his name, but this is what he had to say about it.

Fig. 8

With STUPIDITY such as this, America is becoming far less great than it once was. It is certainly not the America that I was willing to risk my life for in the Jungles of Vietnam when I was just 18 years of age. And in it’s current state it is not the America I would be willing to risk my life for again at the age of 71.

With all that being said … Let me be the first to congratulate …

All you folks out there that thought you had no student loans to pay off … because now you do have them.

All you folks who decided to go to work and earn a living so that you could start life at “0” rather than being deeply in debt … because now you have to pay off debts for the deadbeats that are still in their 20s, 30s, 40s. and probably 50s and still living with mom and dad because of student loans.

All you folks that voted for the “Progressives” in government that are taking every opportunity they to destroy this country. We should be calling these people “Regressives” and not “Progressives.”

What can WE THE PEOPLE DO? Not much other than to Vote them out in 2022 and 2024. But we can’t do that sitting on the couch watching sitcoms and other TV Propaganda. It is past time to flood your congressional leaders mail, email and phone lines expressing dissatisfaction from you – their employer!

In other words it is time to quit being lazy and take our country back!!!

2 thoughts on “I’m Sorry. It’s your debt, why should I pay it?

  1. Bronwyn Libelle

    You know I told my kids to work for a year, save up for their first year, and then go to school while working full time. Nope. The first kid quit her job and took out loans. I really have no pity on the loan payments she’s going to have to make. She could have even seen if she qualified for a scholarship, she would have probably gotten one with her grades. Too lazy and no eye for the future. Now the others want to follow her example, and won’t listen.

    1. Bronwyn, I understand the frustration. Let me tell you a little bit about how to parent. Quit advising your kids – I gave up on mine long ago. You’d be better off to pay one of your kids friends a fair sum to tell the kids what you want them to know. They will listen to their friends before they will listen to you. Just remind the friend that they will not be paid until your kid heeds their advice. Believe me … it will work far better, and I wish I would have thought of this when my kids were younger. Thanks again for reading my articles. I have another interesting one coming out today … about investments.

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