Weekend Reading: Student Loan Forgiveness Edition

Student Loan Forgiveness Edition

It’s graduation season for university and college students across North America. The biggest story of the week came from tiny Morehouse College in Atlanta, where Morehouse’s commencement speaker and tech billionaire Robert Smith pledged to pay off the student loan debt of the entire Morehouse Class of 2019.

Smith’s generous gift will wipe away student loan debt for the 396 Morehouse College grads, an amount that is worth approximately $40 million dollars – or just over $100,000 per graduate.

News of the gift spread quickly and sparked debate around student loan forgiveness, both more broadly as a national policy (Americans carry $1.57 trillion in outstanding student loan debt), and in the case of Morehouse as a question of fairness.

That’s right, incredibly some have questioned the “fairness” of Smith’s tremendous pledge – as in, is it fair for those families who saved and had their kids graduate with little to no student loan debt?

We don’t get to decide what is fair. This wasn’t some government policy. It was Robert Smith’s money to give away as he pleased. Let’s be thankful he didn’t give it directly to a college that just stuffed it into a billion dollar endowment. This will directly impact the lives of some 400 young adults.

It provides economists with a ‘natural experiment’ to see what can happen when you graduate with zero student loan debt. Simply follow the class for the next 10-15 years and see how they compare to their debt-ridden peers.

I just don’t understand the mindset that “if I suffered, you must suffer.” My wife and I had student loan debt. We save in our kids’ RESPs so they can graduate debt-free or as close to it as possible.

But if they graduate debt-free thanks to our diligent saving, and then some philanthropist comes along and forgives their peers’ student loan debt, I’m not going to be upset about it or cry about fairness. Our kids will still be on the same debt-free playing field. The difference is their parents were the benefactors instead of some random billionaire.

The bigger question of fairness should be centred around college affordability. Why have we allowed tuition to soar so high that it forces students to take on crippling debt post graduation? Meanwhile college endowments grow to record levels yet these schools still fail to provide broader access to lower income families.

Want to understand how to fix the student loan problem? Start by listening to this Freakonomics podcast with Purdue University Mitch Daniels. He’s driven down costs at Purdue and says, “The all-in cost of attending our school in 2021 will be less than it was in 2012.”

That’s a great start.

This Week’s Recap

This week I wrote about switching my investing portfolio from a two-ETF solution to Vanguard’s new one-ticket ETF called VEQT.

Over on Rewards Cards Canada I listed all the Aeroplan credit cards offered in Canada, including a couple of incredible sign-up bonuses (until June 2nd).

And on Young & Thrifty I wrote a monster post about the best TFSA investment options in Canada.

Many thanks to Rob Carrick for including my post about taking CPP at 70 in his latest edition of Carrick on Money. Always appreciate the support!

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Weekend Reading:

Dan Bortolotti explains the fine art of rebalancing your portfolio.

“Rebalancing shouldn’t be expected to boost returns, and even occasionally lowers them. But you should still do it—just not too often.”

A highly entertaining and informative post from Michael Batnick, who met with the CFO at his Rotholtz Wealth Management form and explained what he learned from doing a financial plan.

Rick Ferri says the truth about index funds must be repeated over and over because lies are constantly being told.

Can Canadian seniors collect government benefits while still working? Jason Heath explains in his latest MoneySense column.

Can you save too much money for retirement? Only 20 per cent of 65-year old Canadians will live for 30 years — and that means their money will far outlive them.

Choked off by pension contributions – why one Millennial feels smothered by retirement savings. I have mixed feelings about this one. On the one hand, you need to save for retirement and forced savings in the form of pension deductions automatically coming off your paycheque is in your best interest. However, you might not plan on sticking around this job for 25+ years and would prefer to control those funds now:

“I’m probably somewhat representative of most millennials in that we’re trying to balance a bunch of different things at this stage of life. Flexibility is really key in our finances, and pensions are inflexible by design.”

Nick Magguilli has a problem with fantasies in the financial media and wants the financial pornography to stop.

Josh Brown, Ben Carlson and Michael Batnick sat with author Ramit Sethi to discuss the second edition of his bestselling book “I Will Teach You To Be Rich”. They discuss all of the silliest advice out there, the biggest misunderstandings in the world of money:

The next time you’re looking for financial tips, forget about Warren Buffett or Jeff Bezos. Try Elmo, Cookie Monster and Big Bird. Why Sesame Street wants to teach your kids about money.

Do you consider your home a great investment? The price appreciation of a house is “pretty modest,” said Jonathan Clements, editor of HumbleDollar.com.

Oxfam claims if childcare costs were reduced by 40 percent it would see 150,000 women return to the workforce and boost Canada’s GDP by $8 billion, or two percent.

Million Dollar Journey explains that financial independence is all about the ‘why’ not ‘how’.

The Lemonade website says the happiness equation = genetic happiness baseline (50%) + daily activities (40%) + life circumstances (10%). So, the key to being happier?

  1. Do ‘daily activities’ that boost your well being
  2. Elevate your ‘genetic happiness baseline’

Tax expert Evelyn Jacks lists eight essential ‘post’ tax season strategies.

Michael James explains the cost of longevity risk in response to the decision to take a lump sum commuted value or a pension benefit for life.

Finally, if you have an hour to kill I highly recommend this video called Thinking in Bets by world famous poker player and author Annie Duke. Fascinating stuff.

Have a great weekend, everyone!

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1 Comment

  1. Russ on May 25, 2019 at 11:34 am

    Those with some level of biblical literacy will, in response to the questions about fairness in the Morehouse College story, recall Jesus’ parable of the workers in the vineyard found in Matthew 20:1-16. In brief, a vineyard owner hired a series of day labourers, each one starting at different times of the day. At the end of the day, they each were paid the same wage. This offends our sense of fairness in the same way that Robert Smith’s gift offends. The parable is about God’s generosity (or to use the more theological term, God’s grace). I would argue that the same may be said about Smith. He’s being generous. Is it not his money? Can he not gift it in the way he sees fit? And along the way, has Smith not done an excellent thing by raising the issue of student indebtedness?

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