It is spring break time. So, you can expect to see stories about young people going to Florida, the Caribbean or Mexico to party. Nothing new. However, this year, there have been a slew of stories about students supposedly using their student loan money to fund the party. A recent Forbes article by Kate Ashford stated that a recent poll of students indicated that 30.6% of students stated that they are using student loan money to help pay for spring break this year.
Why would students do that? An Investor Business Daily editorial indicated that just under one-half of millennials believe that their student loans will be forgiven. After all, Bernie Sanders advocated for forgiving student loans.
So, if the loan is forgiven, who is left with the bill? The taxpayer. Sometimes that approach may have some validity on a societal basis if the beneficiary is truly needy. However, the bottomline is that people with a college degree or higher make significantly more money than people with only a high school degree. So, in effect, the student loan borrowers looking for blanket amnesty are expecting less fortunate people to pay their debt. Not going to work, especially considering the outcome of the election.
Lets get real. Student debt is over a trillion dollars, and up 17% since 2013. Student loan debt is rising at a rate 3 times inflation, and it is not getting better. Moreover, on federal loans, the Department of Education has many nasty tools to insure that they are going to collect their money. The loan is hardly ever dischargeable in bankruptcy, and the DOE can garnish your wages, grab part of your social security check and your full tax refund without even going to court. Private lenders got all the benefits of non-dischargeability without having to make concessions to borrowers on repayment plans geared to income (Congress really dropped the ball on this one). Borrowers are not going to get a political bailout, and face a daunting task if they default on either a federal, state or private loans.
Who do you turn to? Your friendly servicer. According to the government, the servicers are there to advise the student about the best way to deal with their students loans. But many just push you into forbearances. In the short run, that may forestall payments. However, the accrued interest is just added to your principal debt. So, you leave forbearance owing more than you entered. In January, the CFPB filed a 66 page complaint against Navient alleging, among other things, that Navient pushed federal loan borrowers with long term employment issues into forbearances instead of income driven plans.
Your student debt is not going to go away miraculously. You are going to have to deal with it. We are here to help.