Saturday, October 09, 2021

Expect Biden To Forgive Student Loans

Why?  Because I just paid mine off.

If he does make some blanket forgiveness now, I'm going to be all sorts of annoyed.

It is nice to finally have them done. 

But, we'll be throwing that monthly payment into the kids' college funds so no change to the monthly budget.

This has advantages and disadvantages.

On the one had, it is saving for, and paying for college, so they should theoretically have less debt at the end of it and we're helping pay for their education.

On the other hand, saving for college makes you less eligible for financial aid and actually increases your expected family contribution for college, which increases the cost of going to college.  This means you will be paying more and potentially incur more student debt than if you had gone off and spent the money on frivolities instead of saving.

The higher education system's cost and payment system is almost as opaque and broken as our medical system's, mainly due to the same problem of government intervention in both.   The sticker price in both cases isn't really the sticker price.

For example, and its not quite as straightforward as this, but if your child works before going to college and earns say $6,000 and saves it rather than spending it all before applying, then $3,000 of that becomes part of the EFC raising the cost each year that she's expected to pay by that $3,000.  This is because many if not most universities tend to reduce their tuition and/or cover the cost that exists beyond the EFC amount. So, if she hadn't worked she would not have been expected to provide that and her cost would go down.   Lots of other assets and income from parents get counted as well and its rather hard to tell where you stand and how much college may actually cost.

There's lots of bad incentives against savings in the educational financing system.


Well Seasoned Fool said...

Not that it will matter to him and his handlers, can he legally do that?

Aaron said...

WSF: Legally probably not, but given this administration's respect for law and order some Democrats claim an executive order could be issued to forgive student loans. I half expect it gets shoved into the 3.5 Trillion bill and passed so we can see what's in it, as an act of Congress could legally forgive student loans.