Memo – Student Loan Debt Crisis | A CPA’s Perspective

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I wanted to share my CPA perspective and analysis regarding the student loan debt crisis. There is so much talk today by our elected officials that the student loans should be forgiven.

This idea fails to recognize the reality of the transaction that is at the heart of acquiring student loan debt. Many times this reality is outright consumer fraud.

The best way for me to explain the student loan debt crisis is with an analogy.

Let’s say you bought a brand new car for $100,000 and you took out a loan to pay for it.  So you now have car loan debt of $100,000.00

You go to the car dealership to pick up your brand new $100,000 car and you drive it off the lot. One block away your brand new car breaks down.

Under the current student loan forgiveness model, the government and your elected officials are telling you to leave your brand new broken down car on the side of the road, and that your taxpayer neighbors should pay off your $100,000 car loan.

We all know this is ridiculous, and anyone suggesting this would be seen as irrational.

The thought of taxpayer funded student loan forgiveness is just as irrational and disingenuous. 

In the case of the broken down car and the related $100,000 loan, we know that the car manufacturer is responsible and they must make good on the faulty product that they sold you. If they can’t make the car fully functional as ordered, then they must forgive your loan and take their faulty vehicle back. 

This should be the same approach for the student loan debt. The college degree that does not provide a life supporting job is analogous to the broken down car that you just drove off the lot.

A 4 year degree, or certification from a technical school, must readily afford you a life supporting job or it is a lemon, just like the broken down brand new car. This includes living as an independent adult who can pay all of their own bills including the related student loan debt. 

If you have a four year degree and are unable to live independently of your parents, you have been defrauded. 

And, just like that brand new car, we know who sold you the defective and many times worthless degree.

We have lemon laws in place for car purchases. We need similar consumer protection lemon laws with regard to college degrees. The educational institutions that sold you a lemon degree must be forced to take financial responsibility.  They must be forced to reimburse you for any student loan payments you made already and to forgive any remaining student loan balances on the defective education they sold you. 

Remember, there is no government money, only our money and our neighbors’ money.

Just as you would never expect your neighbors to pay off a car loan for a lemon that you bought, we should never expect our neighbors to pay off a student loan for a lemon of a degree that we purchased.

At a minimum, we all expect a 4-year degree to afford us a life-supporting job. This is universal. Ask any parent. “Would you send your child to a 4 year school, taking on tens of thousands of dollars in student loan debt in the process, knowing they would not be able to support themselves upon graduation?” Of course the answer is universally no and it should be. 

This is analogous to expecting a fully functioning automobile.

Colleges and universities don’t share this goal, and they will openly tell you they offer zero guarantees of getting a life supporting job upon graduation. This is the same as the car dealer telling you they offer no guarantee that your brand new $100,000 car will work at all or at any time. We would never buy that car.

These are the types of degrees that our children are buying and taking on life altering and life stunting debt for. Many of our children will never be able to become fully functional adults. The human cost is immeasurable on so many levels. For example, how is a young man supposed to find a wife and start a family, when the degree he has does not allow him to find life supporting employment for himself?

It’s very clear, if someone has a student loan that they cannot repay, that means that the college degree that that student loan paid for is a defective product. 

Just as the car manufacturer is forced to take responsibility and make things right with a broken down brand new car, the educational institutions must be forced to do the same.

This is one of the most extreme examples of consumer fraud that I have ever seen in my career.

Once you understand this concept, it all becomes extremely clear. Don’t allow the divisive rhetoric of the politicians to confuse the issue.

If you, or your child have student loan debt for a 4 year degree, or certification from a technical school, that you cannot pay due to the inability to get a life supporting job with that degree or certification, then you have been defrauded. 

Instead of a taxpayer bailout, the politicians focus must now be directed towards the educational institutions who defrauded us. 

They must be forced to forgive the loans that paid for the lemons that they have sold us and our children and reimburse us for any student loan payments we have made already.