College Planning and College Loans

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Today, let’s talk about college planning and college loans. Here is a link to a speech given to the graduating class of 2019 at Morehouse University where the graduates were told that all their student loans were going to be paid through a grant. The graduates were understandably excited, but it got me thinking.

Imagine my roommate had to take out a big loan to pay for college, whereas I paid for everything myself. I worked to earn the money so that I would not be saddled or encumbered by a big loan after I graduated. And then at my graduation, I find out that if I had a loan, it would have been wiped out and I could have left my “college” money sitting in a bank account.

Recently I was watching the 10 candidates in the first Democratic party debate and the subject matter of college loans came up. At least one or two of them want to eliminate all student loans, as part of their platform. (Warren and Klobuchar)

As a general rule, whenever we do planning for people, we want to try and avoid them being in debt. But, in this day and age, I might not be so quick to pay off my college loans being that the government might pay them off for me. A lot of people will pay off their loans, whether it be a mortgage or a college loan, not recognizing that there are advantages to these loans, but also potentially some real disadvantages, one of which I classify as what we call, ”loss of control.”

The day after the students found out about the grant to pay off their loans, they couldn’t go back and say, “All right, let me borrow $300,000,” even though that’s what they paid for college over the four, five, or six year period. It’s important for people to recognize that we’re in a situation where the rules of the game may change. College loans may be wiped out. Some wealthy billionaire might decide to make a grant to pay off students’ college loans.

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