Why you should keep paying off your student loan debt

Clark Howard Staff | April 23rd, 2019

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One presidential hopeful wants to do student loan forgiveness in a big, bold way — but does that mean you should stop paying your federal student loans?

What you need to know about the new student loan forgiveness proposal

Senator Elizabeth Warren has released a $1.25 trillion proposal that would cancel student loan debt for most people and do away with tuition at public schools.

The plan calls for the elimination of up to $50,000 in student loan debt for every person with a household income of less than $100,000. Those with higher incomes, up to $250,000, would have a portion of their debt forgiven.

The proposal also seeks the elimination of tuition for undergraduate studies at public colleges and universities. In addition, Warren’s proposal would cut federal funding to the for-profit college sector.

A Warren aide cited by the New York Times notes that her plan, if it gains traction, could impact 42 million student loan borrowers.

Meanwhile, the Massachusetts senator wants a tax increase on America’s wealthiest corporations and private citizens to fund her plan.

But remember, this is just a proposal! So the core question remains: Is it safe to stop paying your federal student loans now that Warren has announced her plan?

The answer is, as you can imagine, a resounding NO!

Clark’s take

Money expert Clark Howard comes at the questions this proposal has raised from a very different economic angle.

The problem with student loans is they’re so easy to get and the amount you can borrow is essentially unlimited, according to Clark. That has removed all incentive for colleges and universities to be more efficient and to control expenses and tuition.

“I don’t see the problem being what to do about people who have student loans,” Clark says. “I see the problem being the ability for a teenager to borrow money in such large amounts without understanding the full consequences.”

“There’s too much money sloshing around the education system. That is the real problem. If I were your emperor, I would greatly reduce the ceiling on how much borrowing someone could do for school.”

Meanwhile, the consumer champ suggests that for people of lower income, we should go back to basics. He says we need to make more money available as grants for those who live below the country’s average income.