President Joe Biden has spent much of his time in office trying, with varying degrees of success, to forgive student loan debt. Now, we're finding out how those who received that relief are doing, and it turns out most of them are...wait for it...in debt. A recent study out of the University of Chicago finds that borrowers who had student loans forgiven have increased their debt in other areas, like credit cards, auto loans and home loans. And their credit scores have not improved, suggesting they've just replaced their student loan debt with other debt.
The Wall Street Journal did a similar report on student loan forgiveness recipients and found most are still struggling financially as bad or even worse than before. The statistics seem to back up these findings, as the Biden administration has so far forgiven some $1.3 billion in student debt for nearly five million borrowers. At the same time, total U.S. household debt has risen to an all-time high of more than $17 trillion.
Mitch Kramer, founder and CEO of Fluent Financial, says this stems from an entitlement mentality in the younger generation. "A lot of these kids got these degrees and see their peers doing really well, and they feel like they should have the same level of success, and are entitled to have these loans waived," he tells KTRH. "And with that new money they should be putting away in savings, they just use it to maintain an increased lifestyle."
This rising debt spiral also demonstrates that forgiving debt only encourages more borrowing. "When you remove any negative consequence, there's no learning opportunity," says Kramer. "When you look at anyone in life who has had tremendous adversity, there is a growth experience on the other side of that."
"When you don't reward people for paying back debt, you're basically condoning the behavior for them to be financially irresponsible," he continues.
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