3 Reasons We Shouldn’t Bail Out Student Loan Borrowers

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As the cumulative total of student loan borrowing approachesĀ $1 trillion dollars, calls to forgive some or all of that debt are mounting. Federally guaranteed student loans make upĀ more than half that totalandĀ Barack Obama is pushingĀ to cap the amount any borrower must pay back in a given year and forgive outstanding balances after 20 years.

Among Occupy Wall Street protesters, calls to bail out student loan holders areĀ arguably the single-most voiced demandĀ and sites such asĀ Forgive Student Loan debtĀ beat the drum for immediate and widespread relief.

But forgiving student loan debt is a very bad idea for at least three reasons.

1. These loans are voluntary.Ā All borrowers are excrutiatingly well-informed of how much theyā€™re borrowing and how much theyā€™re going to have to pay back.

About half of all college studentsĀ take out loans and when they do, every lender clearly spells out exactly how much youā€™re on the hook for and what your monthly payments are going to be after you leave school.

Critics say that 18-year-olds donā€™t understand what theyā€™re getting into and shouldnā€™t be held accountable for their decisions. But thatā€™s an argument against letting kids attend college, not against letting them borrow against future earnings to get a degree that will increase lifetime earnings by somewhere between aboutĀ $280,000 and $1 million.

2. The amounts being borrowed are hardly overwhelming.Ā While the cumulative total of all college-related debt is huge ā€“ approaching a trillion dollars, itā€™s bigger than credit-card debt ā€“ itā€™s not so big for individuals. The typical college graduate who borrowed money to attend graduatesĀ owing about $25,000. Theyā€™ve got a minimum of 10 years to pay back that amount and the repayment schedule can be extended and modified for a wide variety of reasons.

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