President Biden has announced that he will be canceling $10,000 worth of debt per student borrowers who make less than $125,000 annually, however, some students and critics of the president are alleging the plan is not enough. Dan Geltrude, the managing partner at financial consulting firm Geltrude and Company, joined Cheddar News to discuss the issue “What President Biden here is proposing is simply putting a very, very expensive band-aid on a problem that is very far-reaching. And let's go right to what the problem is," he said. "The problem is that college is simply too expensive."

Closing Bell

Critic Says $10k Student Debt Relief Does Not Fix the Systemic Issue

Welcome back to cheddar News is closing bell. Everyone while president biden Wednesday announcing a plan for student debt forgiveness. Forgiving between $30,000 for those, making less than 100 and $25,000 a year for families earning less than $250,000 a year plus an extension on the federal student loan pause until january of 2023. Critics say it isn't enough though and doesn't actually solve the bigger systemic issues facing students in this country, like those who borrow from private lenders and tuition costs that are increasingly a blocking access to higher education. So joining me now is Danielle Trude managing partner at the financial consulting firm, guilt and co dan, it's good to see you and I want to see start here by hearing from some students student defense, which is a nonprofit that is pushing for bigger changes comparing the plans, bailing the water out of a sinking boat without actually plugging the leaks. They're not fixing the issue. Do you think that's correct? Oh yeah, it's definitely correct. Look, what President biden here is proposing is simply putting a very, very expensive band aid on a problem that is very far reaching? And let's go right to what The problem is the problem is, is that college is simply too expensive. Okay, now, why is it so expensive? Why has college over the last 15 years? Why has tuition increased 4.5 times over the inflation rate? It's because students are willing to pay colleges and universities are a business. The customers are the students, you charge as much as a customer is willing to pay and easy access. And I would even say predatory uh policies that gives students all these loans that put them so deep into a hole is what's caused the problem. So the colleges continue to charge the students continue to borrow. Everybody seems to be happy until it's time to pay the loans back and that's why we find ourselves in this mess. $1.7 trillion 40 million Americans who can take advantage of this one time relief at the same time that the administration is saying its primary focus is to fight inflation and so by flooding the system with all of this money, what does that do to inflation? I don't see how this doesn't increase inflation because if we really break it down in the most simple terms, you are putting money back into people's pockets, what are they going to do, presumably they're going to spend it spending is part of increasing demand right now. Our inflation problems relate to the demand side of the we're raising interest rates to try to bring demand down. Well, you put more money out there into the system and more spending happens. This is a supply side problem. So in my opinion, we're completely going down the wrong path if we want to address inflation with a program like this. So of course this applies to borrowers who are now earning income, who will be able to take advantage of this one time relief. The one time relief of $10,000 to $20,000 depending on your income, doesn't apply to future college students, even though the president did propose some relief capping those max regular payments at 5% of income versus 10%. So potentially that could be a positive down the road. But how do we fix the root cause of soaring tuition costs that have only continued to go up in this country? Well, you're exactly right. It is a very, very tiny step towards the future problem. The bigger problem. So here's what I would propose. Anyone who's going to get a loan related to education, You have to be required to take an educational course so that you have these 17 and 18 year olds and their parents understanding what they're getting into. Look colleges, I have news for you, their employment agencies, that's what they are. You go to college. Yes. To learn, but to get a job. So how much are you willing to invest in this employment agency to get you a job? So you have to have the knowledge there. The second thing is is that the universities are at no risk. They keep charging more students get more loans from the government. You know what I say? The universities should have to give some of those loans themselves, Let them be on the hook, let them deal with potential bad debt. And then the last thing I would say is have loan limits based upon certain majors, right? If you go out and get a loan for anything, whoever's lending you money says how you gonna pay it back. So depending on what you're going to major in, you could have a pretty good idea of how much money you're gonna make in that field. Can you pay the loan back? If the answer is no, you shouldn't be able to get the loan or pick a different college with a a more economical solution. All right, dan, good solutions that you're bringing forward. Thanks so much for coming on the show. That's Danielle Trude, managing partner, financial consulting from jail. Trude and company