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I spent the final days of my vacation at Santorini Island in Greece. There, I saw a lot of young people partying, walking around the marble streets, and lounging at the hotel pool. I’m sure among them were recent law school graduates. Since it was late May, I assumed they were having their post-graduation celebrations. I’m sure they will post photos on their social media profiles flexing their hotel rooms with ocean views and eating dinner at restaurants overlooking the Mediterranean sunset. But when they return, many of them will begin adulting, which includes repaying their student loans.
Some people will see this as the typical reason for not forgiving student loans. Otherwise, taxpayers will be paying for their all-expense paid vacation. They will say something like, “Did these people have to spend thousands of dollars on plane tickets, hotels, and expensive restaurants? Couldn’t they instead have celebrated a staycation at the local TGI Friday’s and use the rest of the money to pay down the loan principal? Why can’t these people exercise some delayed gratification and personal responsibility?”
Most of these people seem to think that student loans (or just debt in general) should take priority before spending on fun stuff. And generally, this advice is sensible. Others take it a few steps further and advise that you spend all of your money early on to both pay down debt and save for retirement, even if it takes a decade or more. These tend to be the people who advocate the “Financial Independence, Retire Early” lifestyle. While saving excessively is good, I am not sure whether I can live on rice and beans for years.
Some will have trouble dealing with their student loan debt. There are some who are just not good at managing their money. But others are hurting because they suddenly lost their job.
But others can live with debt even if they do earn a large income. Probably their biggest debts are their home, their cars, taxes, and their student loans. But they are not living paycheck to paycheck. They can probably pay everything off in a few years if they really wanted to and are willing to sacrifice a few things and experiences to do so. But they choose not to because they want to have money in a savings account or just splurge on occasion. Would the “personal responsibility” crowd object to these people spending money on vacations instead of paying off their debts early? I doubt they would so long as bills are paid as agreed, and the vacation was planned and budgeted ahead of time.
Lastly, there are some people whose debt load is so large that it will take decades to pay off their loans, even if they saved and sacrificed. But by then they will have given up the best years of their life. I am not sure if I want my headstone to say, “At least I paid off my student loans.”
On that note, going back to the young people celebrating at Santorini, I don’t know their student loan situations, but its safe to say that each has a unique story. Some took no loans at all because of a generous scholarship or because someone else paid their vacation costs. Others probably saved up for it by working extra overtime at their part-time work-study jobs. And some just said the heck with it and paid for their vacation with their credit card.
Generally, it is not a good idea to use student loan money to pay for lavish vacations. And if you are out of school and earning money, it is better to use your earnings to lower debt instead of hoping that a fairy godpresident will make all student loans disappear by waving his magic executive order pen. But debt should not be a barrier to taking vacations so long as people are financially responsible about it. This means setting up a budget plan and saving enough money for travel costs. We shouldn’t use lavish vacations as the main talking point for making student loans difficult to discharge. If paying debts off should be a priority, then by that logic, everyone should pay off their mortgage and car loans before they can spend money on a vacation.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
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