The Stafford Loan interest rate discussion is missing the point

Written by
Peter Dunn

Unless you've been living under a rounded stone, then you know about the possibility that Stafford Loans (the federal student loan mechanism) could see their interest rates increased from 3.4% to 6.8% on July 1st. This means that current and future students would have higher interest rates on the money they borrow for college. There is outrage. Absolute outrage.

The outrage is misguided. If you will for a moment, suspend your outrage and look at the college cost problem from a different perspective. The average student will suffer an economic loss of $1,000 based on the rate increase. This means that a hypothetical education will cost $1,000 more than it did prior to the rate increase. (People that currently hold student loans aren't really affected). The solution is simple, yet immediately dismissed. Take out fewer student loans.

I have studied peoples' spending and borrowing habits for nearly 15 years, and I can say without a doubt, that people that get angered about interest changes are people that look immediately to debt for solutions. At some point in the last 30 years, the solution to every economic problem in this country became borrowing. Can't afford a car? Borrow. Can't afford surgery? Borrow. Can't afford a TV? Borrow. Can't afford fast food? Borrow. Our collective financial sensibility has gone to hell.

We look at challenging financial situations and immediately come to the conclusion that we must borrow. The government does this, and the citizens of this country do this. If you are getting heated while reading this, then this newfound debt complacency has started to trickle into your mind. The absolute last resort should be to borrow money for college or anything else we can't afford. But it's NOT the last resort. It's the absolute first thing we do. Show me a student that finds a way to pay for college without immediately turning to loans, and I'll show you a young person that I will immediately hire. In fact, I just hired a young lady who refuses to take out student loans to fund her education. Her determination isn't short-lived. Why aren't we teaching young people how to scrap? Instead, we teach people to bitch about student loan rates.

There's another piece of legislation on the table in Congress called the Student Loan Forgiveness Act. It's a RIDICULOUS piece of legislation. Yes, several people across the country are struggling to pay back the crazy amount of student loans that they took out in college. But how is that the government's problem? If I get a tattoo on my neck that I later regret, should the government step into pay for its removal? I had a young lady in my office the other day that had an "extra" $12,000 leftover from her student loan check. She went on Spring Break with it, fixed her car, and paid for a relative's cell phone bill. I would be beyond salty if my tax money went to pay for her student loan forgiveness.

In my book, Avoid Student Loans, I write how the average student can save thousands of dollars by simply taking the correct high school courses. Why isn't that being talked about? Why isn't there outrage about the choices being made by the people? If you blame the government for everything, then this nation is doomed. Our future is dependent on our individual choices.

What about all the kids out there hustling? Our lives are defined by our decisions. If we are constantly bailed out for poor decisions, then we will never learn from our mistakes. The solution isn't to forego college. The solution is to take out less student loans. The solution is beyond simple. Yes, you have to work hard to replace student loans with actual earned income, but the alternative is unacceptable. Well, at least it should be.

We will never progress forward if we are constantly looking for other people to solve our problems.

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