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EricN Publications by Eric Niewoehner
EricNPublications by Eric Niewoehner

The Problem of Student Debt

May 1, 2022


A blanket forgiveness is simply throwing money away and undercutting the millions who attend college for the right reasons, who pursue higher education intentionally, without the help of handouts. It undercuts one of the critical principles of a free economy – accountability.


I normally do not begin my articles with a video, but this is what immediately came to mind when I heard over the news that Biden and the Democrats were going to press for student debt forgiveness.

Blanket forgiveness of student debt is a bad idea.


But it is a serious problem, a problem not only caused by students, but by colleges and government. This is everybody’s problem, and everybody needs to be involved in fixing the problem.


But who is everybody? Stay tuned.

Being swamped in debt is a terrible experience. I have been personally fortunate in my life, but I have helped others who have had to face what seems as an impossible task. I hold to the philosophy that aside from your home mortgage, debt is not a good thing. I mean all debt. No credit card debt. No car loans. No loans on anything – period. Debt determines your life. That is a universal truth. It will direct the decisions you make. It will determine how much of your life you will devote to work. It will produce anxiety, depression and hopelessness.


It is interesting how the apostle Paul once said that “godliness with contentment is great gain.” The opposite of debt is contentment. People who have modest usage of credit cards with no debt are also people who have forgone the purchase of goods and services. They have made decisions to NOT buy things. But as the years progress, a funny thing happens. Their “contentment” translates to wealth. The home they live in may be modest, but it is paid for. The car they drive may be simple and old, but it is paid for. They are content in every way.


So we throw before eighteen year olds this philosophical quandary, discarding their instinctive wariness, making it appear that generating $50,000 in debt is a “what everybody does.” When I look at my life, the only time I borrowed $50,000 was to buy a house! The difference is that the house is always there. There is nothing but dreams, unrealistic expectations, and uncertainties awaiting college graduation. It is, in some respects, like lending someone to put money on a horse at the racetrack. It may be a good horse, but only one horse wins.

The Problem


Depending on the source and timing of the data, the average student debt is between $37,000 and $41,000. That is a serious hunk of change, but anyone who has been involved with college in the last few years can attest, surviving four or more years of college with only $40K in debt is not bad, considering that a typical quality education costs about $40K per year. That means you found a way to invest four years of life for a future career and did so paying the bill for three of those years. That should be encouraging. People pay that much for a Ford F-350 these days, and it depreciates. You just invested in college. It’s value, theoretically, should appreciate over time. While $41,000 sounds like a lot, it is not the end of the world.


What is uniquely different from 2022 and 1972 is that everybody seems to be in debt at the end of college. Surrounding that average are the thousands of students who managed to get through college owing far less. They did so through hard work, scholarships, and wise choices in their journey. A small percentage did so because mom and dad paid for it, but most everyone had to sign a dotted line obligating themselves to pay the full bill. And they did!


On the opposite end of the spectrum are the sad stories we read and hear about, the horror tales of mounting up to $120K in debt, graduating with a dead-end degree or simply finding that a degree does not gain access to meaningful income.


The most important first step is actually identifying the problem. There is 1.75 trillion dollars of student debt out there. That is ridiculously high, especially when you consider that only two generations ago student debt was almost unheard of. Yet despite that big number, the size of non-performing debt is 23% of that amount. It is still a large number, but considerably reduces the scope of this problem. In other words, 77% of the students are doing the right thing. Some are doing a near-impossible thing, but they are at least trying.


Aside from that 23%, there is a subset of students who simply do not have the income to make a full payment on their debt. Let’s be clear on this – anybody can pay against a loan. Any loan. The problem is paying more than the principle. That’s the problem. So of that 23%, there is a smaller set of students who simply do not have the income to make a payment. These are the people that should be targeted for so-called “loan forgiveness.”


As you can gather, the problem must define “inadequate income.” If a person can afford a new car, they can afford to pay off a student loan. It’s that simple. A person must demonstrate actual economic hardship. When a person lives in a 3000 square foot house in suburbia, has two new cars and a boat, and has a non-performing note, they simply need to pay up. But when a single mom with an ill parent residing in their home with three kids is struggling, it paints a different picture. These are the people that need help. But once again, the answer is not pity and forgiveness, but accountability. They don’t need a handout, but a hand up.


The objective of solving this issue is recovering the money. Forgiving a loan does not answer that question. Instead, it puts the burden on millions of Americans who did not go to college and it is unjust toward millions more who paid for their college education. To recover the money the student has to participate. So the problem is enabling a person of inadequate income an opportunity to dig themselves out of this mess.


The Democrats’ proposal is to eliminate a given amount for everybody. An analysis of that proposal shows the duplicity of the idea. The main beneficiaries of a blanket forgiveness would be students who are responsible, often graduate level, and often in well-paying career jobs. In other words, the problem will still remain because the problem is not with the 77%, but the 23%. The problem is with non-performing loans. What caused the problem and who is responsible? Throwing money at the problem is not answering those questions.

And my personal problem is that I helped pay for the college education of three kids. Do I get anything for the effort? No. Should I? No. Nor should anybody else. The Investopedia article noted that one of the issues with debt forgiveness is “moral outrage.” Recall how the TeaParty Movement got started when mortgage forgiveness was floated. It was a slap in the face to the vast majority of homeowners who had done the right thing – and the hard thing during hard times. They paid their bills. They got a second job if they had to. My first reaction to the Democrats’ proposal was outrage. If the bill passes, I might join with others and sue the federal government. Why should people who were unaccountable be rewarded, while someone like me gave up a lot so that my kids could go to college. Remember that statement about contentment? I drive a 1996 Nissan Pathfinder. It is the quintessential Alaskan vehicle. It looks like it lived in a logging camp for most of its life. I am happy with the thing. But when I look at what I expended in college expenses, I should be driving a brand new Ford F-350. If some get their loans forgiven, I want my Ford F-350. Or I want my life back. Each year that passed I gave up something. I can’t get that back. Thus the outrage. I have not been honored. I have been robbed and betrayed.


Like most financial problems, student debt has more to do with behavior than simply finances. People forget, but economics is a behavioral science. It combines observations of behavior in light of economic activity. One of the chief advantages of economics is that it usually deals with measurables, things like goods, services, and money. In essence, the student debt problem is shrouded in numbers, but is rooted in behavior. What caused an eighteen year old to get into debt? What motivates them to go to college? Why would a college allow a student to get deep in debt? Should colleges be responsible? And on what basis should loan forgiveness be granted without undercutting the entire student loan system?


One of the chief problems with student debt is that the college investment is seriously disconnected with the actual marketplace. I have heard of students graduating with an acting degree and trying to cover a $100,000 debt! What is the employment rate of actors? And what do they get paid? Let me give you a hint – very low. Consider how disheartening it is when a young person with an acting degree loses an audition to someone who simply has talent. Yes – that is the untold secret to college students. YOU DON’T NEED A DEGREE TO ACT! Yet for four years a young person was given an illusion that a degree in acting was worth the financial risk of incurring a loan that amounted to buying a house. Should that debt be forgiven? And if so, does it seem to you that more than just the student is the cause of this problem? Think about that.

The second problem is that students (and their co-signing parents) see college as some sort of rite-of-passage, a place to discover yourself. What sort of idiot thinks that borrowing $18,000 is a way to “discover yourself?” Yet it happens thousands of times every time a semester begins. For those who chock up $100,000 in debt, it is like buying a Lamborghini to decide whether you like to drive fast.


The fixation on college assumes that it must begin at the age of eighteen. Whatever happened to the “walk-about?” I remember how several of my classmates did just that after they graduated. They had poured their hearts and souls into four years of intense study, only to find themselves uncertain about their next step. There was this foreboding concern that college life was not real life. It seemed all of us regarded two things in light of this. First, why go to college immediately? Why not take the year off before stepping into college? And why four years? Why not five? Why not six? Work along the way, experience the world.


To fix the student debt problem, it will need to involve the student, the colleges, and the government. Colleges are culpable. Often well-endowed, they entice students to pursue majors that have no prospect of employment in the private sector. They have added measurably to the cost of college by maintaining antiquated standards and embedding costly aspects to the education process. Government is responsible for making all this too easy. When Biden and the Democrats offer loan forgiveness, we need to remember that we all pay. We will pay in two ways. Our tax dollars will have been forever lost. And the inflationary pressure of free money being released into the economy will further injure the responsible Americans. Inflation is rooted in under-productivity. And a big part of that are the colleges.


A blanket forgiveness is simply throwing money away and undercutting the millions who attend college for the right reasons, who pursue higher education intentionally, without the help of handouts. It undercuts one of the critical principles of a free economy – accountability.


My next two articles will focus on how we arrive at a solution to this problem. First, we will look at the why colleges cost so much to attend. Something explains the debt. What is it? Second, we will explore solutions. Third, we will explore the effects of reforming the financing of education.


To close, a bit of food for thought spiced with moral outrage:




Average Student Loan Debt: 2022 Statistics in the United States”, Nitro


"Student Loan Debt: 2021 Statistics and Outlook,” Investopedia, by Daniel Kurt, April 9, 2022


End Note

For those who read this article on my website, you will notice that ads that pop up courtesy of Google Ads.  I couldn't help but laugh at how spot-on the ads were, some asking that you explore education, and others offering loans.  Explore the one, ignore the other. :)


By Eric Niewoehner

© Copyright 2022 to Eric Niewoehner.

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