4 Reasons You Should Forget Student Loan Forgiveness

financial coaching personal finance Mar 10, 2022

Student loan forgiveness has been a hot topic for the last couple years, and unfortunately, I've heard horror stories of people counting on forgiveness only to be devastated when the rug is pulled out from under them. 

Here are 4 reasons you should forget student loan forgiveness (and just pay it off instead!) 



1. Government sponsored programs can vanish at ANY TIME⁣⁣

This is not a contract that you and the government enter into. They do NOT HAVE TO forgive your loans!!⁣⁣ You could be 9.5 years into a 10 year forgiveness program and they could cancel the program altogether right out from under you.⁣⁣
Think about it.

Rural areas are typically a place where loan forgiveness programs exist because they want qualified workers in a less than desirable area. 10-20 years is a long time, and the population could naturally migrate out toward your rural area. The suburbs expand, your population goes up, and your loan forgiveness program is cancelled.

2. These programs are over SUPER LONG periods of time

Usually somewhere between 5-10 years. Some are as long as 20-25 years. RIDICULOUS. Do you know how much life can happen in 10 years??? Think about where you were you ten years ago. Did everything go according to plan over the last ten years?⁣⁣
This also means that you are not free to leave this job for ANY reason and still receive the loan forgiveness.⁣⁣
If you get fired? You no longer qualify.⁣⁣
Health/medical leave? You no longer qualify. ⁣⁣
Spouse gets transferred or offered an incredible opportunity somewhere else? Hmm you now have to choose between your spouse and your loan forgiveness. Nope. ⁣⁣
Heaven forbid, what if a coworker or boss comes on to you?? These are very serious decisions that you don't want to have to make.⁣⁣
Here's something else to think about:
If the government is offering loan forgiveness at a particular workplace, there's a good chance there is a reason that people don't want to work there without the added "incentive."⁣⁣
Is it a poor area? ⁣⁣
Is there chronic violence? ⁣⁣
Is it not safe? ⁣⁣
Does the job pay below or near the poverty line? ⁣⁣
Honestly, why put yourself in this position? You don't have to! Hustle and pay this stuff off in a couple years and then be free to work wherever you want! ⁣⁣

3. You are putting your future into the hands of someone who DOES NOT CARE ABOUT YOU

Debt forgiveness scares me to my core because these programs do NOT have your best interest at heart. It's honestly a scheme to get people to work in places that have trouble finding qualified candidates...for whatever reason.

Look at the statistics for student loan forgiveness programs:
⁣-99% of people that apply get turned down⁣
-You have to pay income tax on any amount that is forgiven⁣
-Private student loans may not be forgivable⁣
-Only a small fraction of acceptances actually get their loans forgiven⁣

Do these stats scream, "We just really really love graduates and want to help them succeed!!!" Unfortunately, no. 

4. Your loans do not disappear, someone else pays them

There is no loan in the world that goes *POOF* and disappears. ⁣Remember this: someone always has to pay the debt. Always.⁣

This is true of bankruptcy as well. Sometimes the lender eats some of the abandoned debt, but most of the time, it's tax paying dollars that pay back the debt. ⁣

Since the debt always has to be paid back, I believe the person who borrowed the debt should pay it back. It's irresponsible to expect that someone else will pay for it.⁣

The student loan tax bomb

Very few forgiveness programs are tax exempt which means if you are one of the “lucky” applicants who gets your student loan forgiven, you’ll get slapped with Form 1099-C at tax time and you’ll have to pay TAXES on the money that was forgiven as if it was INCOME.

This blindsides people who are not aware and they go from having student debt to IRS debt. 

Student loan debt is also not bankruptable. If you miss too many payments, the loan goes into default and they have the ability to garnish tax returns and eventually wages.

🚫There are NO shortcuts🚫⁣

Make as much money as you can.
To pay off the debt as fast as possible.
Then build a life you love.

What’s your perspective on student loan forgiveness programs? ⁣