What Should You Make of Total Student Loan Forgiveness?

This article was originally written for and published on Forbes. You can also tune into the accompanying podcast here.

Student loans are a subject everyone’s chatting about right now because, for one, it’s always an emotional topic if you have them.

Anytime you’re obligated to repay money that you owe, it can be a source of stress or frustration — especially when you think about all the things you would rather do with that money than send it to a loan servicer.

But the conversation around student loans might be especially fraught right now, because political campaigning is ramping up… and promises of total student loan forgiveness are being thrown around by, well, seemingly everyone at this point.

I’m not interested in getting political — there are countless other hot takes for you to look up if you want to dish on the politics of this.

What I’d like to do instead is to bring the whole idea of “total student loan forgiveness” back to a core tenet in my own personal financial management philosophy:

Focus on what you can control.

We don’t know what’s likely to happen with total student loan forgiveness when it comes to campaign promises. That’s a lot of talk and even if it came to fruition, we’re years away from any action.

But student loan forgiveness itself is not a new thing. Let’s forget about the latest headlines for a moment, and remember that plenty of student loan forgiveness programs already exist.

Student Loan Hero has this great article that serves as a jumping-off point if your interested in learning about some of these specific programs, but they include things like:

  • Forgiveness programs based on where you work or your profession: These include well-known programs like Public Service Loan Forgiveness (PSLF), as well as various options for teachers, nurses and other healthcare professionals, members of the military, and more.
  • Assistance programs, which may not offer total forgiveness but may help with some or all of your balances.
  • Repayment programs that will help reduce your monthly payment now, while eventually forgiving the remaining balance on your loans after a (long) period of time: These would be your Income-Based Repayment (IBR) plans, your Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), and so on.
  • Cancellation programs, like the option for Federal Perkins loan cancellation for qualifying individiauls working in specific professions like firefighters, law enforcement, public defenders and service volunteers.

All of the above applies to federal loans for the most part. Private loans are a different story, which is why you need to be very careful before you refinance or consolidate any student loans.

You can’t refinance a federal loan to another federal loan; you can only refinance to a private loan, which takes away eligibility for many forgiveness programs and takes away some borrower protections in most cases.

You may be able to consolidate federal loans to federal loans, but proceed with caution and read any fine print before you leap into any decisions.

Most student loan experts agree that if you are currently in the system for one of these student loan forgiveness programs, you will eventually have your balances forgiven (assuming you meet all qualifications, make all your payments, and are eligible for forgiveness as laid out by the rules today).

These programs could go away in the future, or they could change.

But again, if you are currently enrolled and participating, the general consensus is that you would be grandfathered in and the original rules would apply to you (and you would not be kicked out of the program, even if the government stops offering forgiveness in the future).

But these existing student loan forgiveness programs are quite different than the ideas being thrown around in the political campaigning arena right now. Some call for total loan forgiveness — a complete wiping-away of debts owed by student borrowers.

Regardless of how you feel about this idea, and whether you support it or not, there are a few things you might want to keep in mind.

The first is to avoid getting too sucked in by the emotion of the moment, and consider things from the bigger picture. This takes us back to focusing on what we can control when it comes to our own financial situations… and you don’t know who will be elected and you have limited control over that.

Yes, you can vote. (And you should!) Yes, you can get out the vote; you can campaign, volunteer, educate, and otherwise find ways to support the candidates you want to see in office.

But what I mean by “limited control” is that, at the end of the day, you do not individually decide who gets into office. What you could decide and directly influence with no other interference from anyone else is something like “here is how will I handle the dollars I have right now.”

You have much more control over your own personal financial situation than radical systematic change that many other people feel just as strongly about as you do (and not all of them share your opinions about the issue).

Even if the political candidates who support student loans are voted into office in 2020, we also want to keep in mind that those people don’t have carte blanche to make up whatever policy they want.

They will still face opposition. Their proposals could be voted down. They will still have to fight to make their campaign promises more than just promises.

Even if student loan forgiveness became “a thing” in government, there are not currently many clear plans for how all this change will be implemented and when it will go into effect. We’re a long way from action.

The majority of the “news” around this topic right now consists of opinions at best and pure clickbait at worst.

If you use the News tab in Google search and type in something like, “what’s likely to happen with student loan forgiveness” you get results like these:

  • The Moral Hazard Of Student Loan Forgiveness
  • JPMorgan CEO Jamie Dimon: Student Loans Are “Irrational”
  • Student Loan Forgiveness Is CHEAPER Than The Republican Tax Scam
  • Canceling all student debt is a bad idea

These are all very emotional headlines. Some are from left- or right-leaning media sites. Others are just from contributors like me, to sites like Forbes or CNN — and that’s not too much authority.

(That goes for me, too. I’m sharing my opinion here just like everyone else, and my hope is that it gives you something to ground yourself in during this time when everyone seems angry, ramped up, and not interested in looking at things calmly or rationally — and calm and rational is exactly what you should be when it comes to your money!)

Keep in mind that the way Google and social media are designed create echo chambers. Google does not give you objective results; Google tries to give you the results you’re looking for.

And thanks to confirmation bias, what humans tend to look for are things that fit with what they already believe.

Regardless of what people say in politics, we can remain grounded in a few facts. The first is that student loan forgiveness programs do exist right now, so if you feel like this is something you want to explore, start by evaluating those programs.

They’re not a solution for magically waving all debt away, as you do have to make payments for a long time — but they could be better solutions than paying all your balances on your own.

So, these programs might not be a fit for you — but doing some research and due diligence is much better than getting caught up in arguments over whether or not total student loan forgiveness should or shouldn’t happen.

And speaking of, even something as dramatic as total student loan forgiveness doesn’t even matter if you’re not going to work on your money mindsets and habits right now.

If you don’t bother doing what you can with what you have, total forgiveness will not automatically equate to you being positioned for an easy road to financial success. You’ll likely take your freed-up forgiveness money and start spending it if you’re free to do so.

Even if someone swooped in and took every bit of your debt away today, if your current financial habits revolve around spending or consuming right now… you will likely continue focusing on spending and consuming.

The takeaway? Don’t wait for someone else to come and “fix” things for you. Look at what you can control and start taking actions that will directly, positively influence your personal financial situation.

That might be as simple as asking questions and seeking answers. You don’t have to do anything drastic — but remember that this isn’t an easy path to walk. Even simple steps can feel impossibly hard.

That’s what financially successful people do, though. They take one step at a time, even when it’s hard, and constantly seek out the next action they can take to make a direct and beneficial impact on their ability to grow wealth.

#FinancialPlanner helping 30 & 40-somethings build #wealth & think differently about #money • Top #FinancialAdvisor in #Boston • www.BeyondYourHammock.com

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