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“Cancel student loans” has become a buzz topic the last few years as the national student loan debt keeps rising and borrowers are feeling the strains of making payments. Many are frustrated that it hasn’t happened already and rightfully so.
But is it something student loan borrowers should really be holding out hope for? Is canceling student loans even possible? Here are 4 reasons why you shouldn’t wait for student loans to be canceled and what to do instead.
Can You Cancel Student Loans?
I think we could all use a little refresher in Economics 101. Let’s first talk about how debt works.
“Cancel” or “forgiven”, these are interesting words when it comes to debt. You can’t just “cancel” debt as if you clap your hands and it magically goes away. The word debt by definition is “something that is owed or due.” So if you don’t pay it, then someone else will.
Who is that someone?
Federal Student Loans are backed by the government. And who provides income to the government? You and me. The taxpayer.
Hello inflation!
But this won’t stop at you and me. This could affect generations to come. So ask yourself, should your children (and their children) pay your student loans?
There May Be Limits
Mass forgiveness on all loans is not likely. If anything, there will be specific criteria that will have to be met for loans to be forgiven, just like the current student loan repayment programs (that also have very low acceptance rate may I remind you).
According to a Forbes article, as of June 3, 2022 President Biden has cancelled $25 Billion of student loans that includes people in the Public Service Loan Forgiveness program, Borrower Defense to Repayment and borrowers that have permanent disabilities.
They may also include income caps on who qualifies for student loan forgiveness. The Biden administration has proposed $10,000 of loan forgiveness for individuals that make less than $150,000 and married or joint tax filers making less than $300,000.1. This could exclude a lot of high earners that are also buried in student loan debt.
Don’t Rely on the Government to Cancel Student Loans
If they do cancel student loans, yes that will relieve the burden for those people – which is great! What you don’t want to do is fall into the trap of relying on the government…because you can be waiting a really long time.
Hope is not a plan.
Best selling author of Rich Dad, Poor Dad, Robert Kiosaki said “Hoping drains your energy. Action creates energy.”
“Hope drains your energy. Action creates energy.”
Robert Kiosaki
As of April 2022, the United States is $30.37 trillion in debt.2 That’s Trillion with a T! And that grew by $2.2 trillion from April 2021 when it was $28.2 trillion. Do you really want your financial future dependent on people that keep sinking the country into debt?
Yeah, I didn’t think so.
Also, the government still isn’t sure who actually has the authority to cancel student loan debt. Is it Congress? Is it the President? They keep going back and forth on this one (surprise surprise) which just shows you that this isn’t top priority for anyone.
Also, they can’t agree on an amount. Congress is pushing for $50,000 per borrower while President Biden wants to cap it at $10,000.
Your Debt, Your Responsibility
I am going to end with a little hard truth. When you signed your promissory note for your student loans, you agreed to pay off the debt. It is your debt therefore it is your responsibility. It’s not the government’s responsibility. It’s not your neighbor’s responsibility.
I know some student loan balances can be crippling and overwhelming but with a proper plan in place I truly believe it is possible to pay student loans off! Loan forgiveness won’t change your behavior with money, which is the ultimate way to get out of debt.
Yes, it may give some borrowers some relief but it’s very likely they will end up with more debt in other ways. There are several stories out there of lottery winners or big earning athletes that lost everything they had because they didn’t know how to properly handle money.
A Better Plan
If you have been waiting for your student loans to be cancelled then I hope this post helps you consider a better plan. The best plan is to cancel your own student loans – by paying them off as fast as you can! Waiting on others is not a good plan. This is your life so attack those student loans like it’s your job! If they end up forgiving some of your loans then consider that an extra bonus.
Need help to get started on your plan? Sign up for a free Money Checkup! A Money Checkup is a 45 minute strategy session where you can ask your top money questions. Don’t waste another day hoping your student loans will go away. Click here to start a better plan today!
1 https://www.forbes.com/sites/zackfriedman/2022/06/03/biden-has-canceled-25-billion-of-student-loans-but-student-loan-forgiveness-still-eludes-borrowers/?sh=41e7af5a7250 2 https://www.statista.com/statistics/273294/public-debt-of-the-united-states-by-month/#:~:text=In%20April%202022%2C%20the%20public,around%2028.2%20trillion%20U.S.%20dollars.