The Student Loan Dilemma

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At the end of 2021, the outstanding U.S. student debt stood at $1.75 trillion.  This is a problem.  Efforts to collect on this debt have proven to be complicated, largely unsuccessful, and problematic.  Proposals to forgive some or all of this debt appear to be currently, politically impossible.  The administration, stuck with campaign promises to cancel up to $10,000 per borrower, and unable to get anything through Congress, continues to extend moratoriums on debt repayments. 

While there does not appear to be any resolution of the student loan dilemma on the horizon, how and when a compromise is reached should be of interest to investors.  The current strategy, which amounts to kicking the problem down the road, is expensive, regressive and moderately inflationary.

Looking forward, it should be apparent that student loans are not an effective method of financing higher education.  Two issues that might warrant consideration in thinking about advanced degrees are, how important is a college degree for many long term economic pursuits, and, how necessary is the inordinately expensive “college experience” relative to remote learning?

We have previously discussed the question of cost versus value in advanced education, in blogs dated September 17, 2015, “Higher Education as an Investment” and June 2, 2017, “Investing in Education.”

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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