Is the Student Loan Forgiveness Program a good or bad thing?
Recently, President Biden announced his Student Loan Forgiveness Program. When will this start or will it even happen? Well, we don’t know. Normally, when things like this are announced, there are still many steps that must be taken before the new program becomes a reality.
Unfortunately, with elections every two years, not much can really get accomplished. All campaigns seem to have a politician saying, “Elect me and I’ll stop these reckless policies that are hurting the American people.” Regardless of which direction you lean politically, they all say the same message in their own way.
A perfect example would be the Affordable Care Act. I loved the premise with that, but it became a mess. I’ll never understand how the concept of “Making healthcare accessible for all” became a document of over one thousand pages. Of course, politicians both loved and hated the Affordable Care Act depending on who was up for re-election.
Over time I believe some points of the Affordable Care Act were removed while others remained. One thing I know for certain is that the healthcare system is not any easier for me to navigate.
Let me give you the most recent example of dealing with the healthcare system.
I’ve had a feeding tube to supplement my nutritional needs since 2011. Supplies for it, including the formula, are ordered and delivered to my home monthly. Recently, Medicare needed some paperwork to be completed and they would not pay for supplies until they received it. My account was on hold, so I could not order anything. It took about three weeks for me to jump through all of the hoops required to complete this simple task.
I’m not sure how many of you know someone with a disability, but I can give you one universal fact. With the challenges we face in daily life, the last thing we have time for is convincing someone we actually have a disability. Everyone wants free feeding tube supplies, right? Woohoo I’m living the dream! (Yes, that’s sarcasm.)
Can the Student Loan Forgiveness Program be another Affordable Care Act?
I hope you can forgive me for not placing too much faith in our political leaders. However, there are many warnings about this in the Bible. If you are not a Christian and prefer not to use the Bible, then read Thomas Paine’s Common Sense. At the beginning of the United States of America, he also warned about creating idols of our political leaders. This was part of the reason why George Washington refused to be a king. Yes, we should honor and respect our leaders, but they should not be in whom we place our trust.
We can argue all day on social media about which policies are right or wrong, but it’s not productive. What we should be doing is thinking about how we as individuals can maximize any benefits we may receive. Life can be frustrating and unfair, but complaining about it rarely helps. People normally experience success when they adapt and overcome any adversity they face.
If the Student Loan Forgiveness Program happens, we should remember we won’t be receiving a $10,000 check.
When I first heard about the Student Loan Forgiveness Program, I posted on social media that this could be the opportunity people have been praying for. I hope that they don’t waste it.
I don’t think it will be a check like the stimulus payments received during the pandemic. The Student Loan Forgiveness benefit will actually be an adjustment to our monthly spending budget. This is where our discipline becomes so important.
Our economy is largely driven by consumer spending. Eliminating an expense from the consumer’s budget can give a boost to the economy. That may look nice politically, but freeing up that much money to be spent can also keep inflation high.
What if we don’t spend the money freed up by the Student Loan Forgiveness Program and invest it in our future?
I firmly believe the best way we can fight inflation at home is to cut spending. When things become too expensive, we must stop buying. Yes, we must continue buying food, gas, electricity, etc. There isn’t much we can do in those areas, but we can all cut back on luxuries.
Inflation occurs when supply and demand are out of balance. If we, as the consumer, decrease our demand, then prices should fall. Sometimes we forget how powerful we are. If 300 million Americans stopped their daily coffee purchases from major franchises, then you would probably see a drop in coffee prices at your local grocery store.
Perhaps you can dine out once a week instead of every other day. You can also seek local entertainment instead of traveling three hours each way. No, it’s not fun, but war never is. Yes, I believe we are absolutely at war with inflation. It won’t be instant, or easy, but it could be possible for us to lower inflation.
Inflation is the reason I am nervous about the Student Loan Forgiveness program.
We can’t focus on whether the Student Loan Forgiveness Program is right or wrong. The real concern is how the consumer responds to the new freedom in their budget. Will they save for the future or will they go after even more luxuries? Unnecessary spending on such a large scale could add extra fuel to inflation.
Yes, blaming others is always the easy answer when we face problems. How often do we say, “If only my (insert spouse, coworker, friend, or family member’s name here) would…, then my life would be so much better?” Looking at ourselves for the solution is a challenge, but sometimes that is where we find the best answer.
Regardless of what their commercials say, a politician cannot make inflation magically disappear. The Federal Reserve will do their part. It will probably be painful, but I do think we can do our part to alleviate the pain by cutting our spending.
Success of the Student Loan Forgiveness Program is more about our spending discipline.
Spending is so easy today. If we’re honest with ourselves, we really don’t know much money we spend each month. We wait for alerts on our phone to see how much money we have left or that we’ve been charged the dreaded overdraft fee.
It’s a hard habit to break when all of our desires can be met simply by opening an app on our phone. When we have a problem controlling our spending, more money is not a great solution. There are many stories of celebrities and pro athletes going broke if you need an example.
Since the COVID pandemic began, we have had a break from student loan payments. Anyone who asked me was told to pay the bill anyway if possible. I wanted to keep the good habit of paying down the debt instead of incurring new expenses. Of course, I also encouraged an increase in savings, but that’s not easy while we battle inflation.
This grace period on student loan payments could have been a great way to prepare us for student loan forgiveness. Was it? Did people with student loans even notice the difference? With inflation so high I’m going to say no.
Again, the student loan forgiveness program will not be $10,000 direct deposited in your account. You will still be living month to month. If you cannot learn to control your spending, then the odds are you won’t notice the “extra money” you have each month. That little inflation bug will notice though.
As we continue to “add to cart” and swipe our cards in a hurry because we’re all so busy, prices will continue to rise. We’ll keep paying these prices because we value our time and convenience more than anything. This is not new as the convenient 20-ounce soda has cost more than the bulky 2-liter for many years.
There could be a great opportunity coming with the Student Loan Forgiveness Program.
Understand this doesn’t mean you can’t have fun and enjoy your life. My job is to help you find the balance between enjoying today and preparing for tomorrow. It’s hard to do that when we don’t have control over our spending.
By not having to make student loan payments a person could lower their credit card debt, put money into a retirement account, pay other debt, or increase their savings. Let’s look at some numbers!
If your monthly student loan payment was $500, then you would have $6,000 a year that was not already assigned to an expense. Currently, the maximum amount you can deposit in an IRA is $6,000. Yes, I purposely used those numbers because I think everyone needs to plan for retirement.
More importantly, however, this example should show you that the $10,000 would take some time to actually get back to you. If the Student Loan Forgiveness Program lowered your monthly payment from $500 to $250, then it would take over three years for you to receive the full benefit. Again, this is not additional money being given to you, but a reduction in your expenses.
Without a financial plan, not only will you probably not notice the change, but you may not be any further ahead by the next election. Then we’ll have to go through the same arguments again as a new campaign promises to “Help all Americans,” “Make life better for the middle class,” or to “Stop the reckless policies that are hurting the American people.”
I don’t know about you, but I’m tired of politicians being the only winners.
They have worked hard to put us against each other, so that elections have become like rival football games. We won’t remember who won a game 15 years from now and we probably won’t remember who won political office.
However, we will be 15 years closer to retirement. Will you be any closer to reaching your goals? Most of these politicians are old enough they may not even be alive in 15 years, so they’re not going to help you. Our success and failure lies mostly on us. We only get one chance at this life and if you’re not pursuing your goals, they may never be reached.
Is the Student Loan Forgiveness Program a good or bad thing? It really depends on you! Are you ready to develop a plan and chase your dreams? Email me!