Are you looking for a non-profit that helps to pay down your student loan debt? Funny thing, because such a concept really doesn’t exist. Go ahead, take a spin on Google. Let me know what you find.
Okay, I know there are organizations that provide financial counseling and education to help you get out of debt, but I’m not talking about that. I’m also not talking about debt consolidators, credit unions, lending clubs, and so on. I’m talking about a non-profit whose sole goal is to help pay off people’s student loan debt.
So why doesn’t such an organization exist? One assumption is that if you’ve graduated college you should be making more money than people without a fancy degree. True story, research shows. There’s also a wide assumption that if you have student loan debt in the first place, you’ve already made mistakes. You didn’t work hard enough to pay it off while in school, you didn’t pick the right school, you didn’t apply for enough scholarships, and so on. But at the end of the day, 21 and 22 year olds graduating from college can’t go back in time and undo years of mistakes or poor financial decisions they (and their parents) made when they were only 18.
Forbes recently reported that total US student loan debt is over $1.2 trillion.
Regardless of your stance on student loan debt, if you could offer a friend or family member a few bucks to help get them out of their loan debt and (potentially) forever change their financial future, would you? What about helping a total stranger? For me, I’d rather donate money to someone struggling to get out from under their student loan debt than give to a charity to fight ALS. It sounds harsh, but I like to see direct results with my giving. And when a campaign goes viral (like the ice bucket challenge), there’s always the possibility that the organization isn’t prepared to handle the huge surplus of cash and mismanages it (though the ALS Association seems to handle their money well).
Let’s say a sort of Kickstarter-type non-profit came together and let students rally their family, friends and strangers to pledge some funds towards their student loan debt. Would it work? I don’t think so. And are we even tackling this issue the right way?
In order for a Kickstarter-type group to operate and help students eliminate their debt, there are a lot of considerations to deal with first. The big one is simply answering why people would want to give their own money to help pay off other people’s debt. They wouldn’t, I presume. Perhaps the only way it might work is if you rally your family and friends to pledge a certain amount of money, say $8.34 per month from 200 people for a year (that would pay off a modest $20,000 student loan balance in one year’s time). But who knows 200 people that would be willing to do that? What about $16.67 per month from 100 people for a year? Not quite as big of a challenge, but unless you’re asking people that have plenty of money to spend there’s no way they will want to commit.
Other issues with the Kickstarter-type approach include the non-profit needing to verify the student loans and their balances, ensure the loans and maybe any other debts the individual has are in good standing and have been paid on time for a certain period, somehow screen the candidates so that only employed graduates in good standing can participate, ensuring transparency in the non-profit so that people are happy to donate and know where their money is going, and a laundry list of other issues.
I think there’s a better way to tackle student loan debt, and it doesn’t involve heavier taxation (such as in President Obama’s suggested plan to provide free community college nationwide). Here it is: What if companies took care of their employee’s student loan debt? Big companies have programs in place to provide financial assistance for graduate degrees but they don’t offer systems to help pay off student loan debt you’ve already accumulated.
What are the benefits of such an idea? Here are a few:
- The employer could potentially write off the expense (though I don’t think current laws/legislation would allow this) and only be responsible for paying the debt if the employee is at the company for a certain period of time and in good standing
- The lender is happy because they’re getting paid promptly by the company, including interest, and don’t have to worry about missed payments or problems from the borrower
- The employee doesn’t have to stress out about student loan payments and can get a head start on their wealth and financial security
There’s a lot to this discussion we haven’t even touched on, but I’m curious what other people think. Why wouldn’t something like this work? What would need to change in order for something like it to be successful?
This is an interesting idea. Student loan debt is an epidemic and is often forecast to be the next major financial fallout. I think there are a lot of people (like you and I) that would give to something like this.
As much as I love the idea, there is another major problem with this idea. How does the organization decide which person’s loans to pay off? And do you pay a little off of a lot of people or all of fewer people’s loans? And can you solicit “pay it forward” type pledges for this from those whose loans get paid for? For example, if you pay off my loans, I pledge to make my normal student loan payment to the organization for at least X number of years after my loans are paid for. If that was the case, sign me up!
The biggest barrier to something like this is probably that it just can’t exist. Will the government grant the non-profit organization tax status like a 501(c)(3) to an organization who’s goal is to pay off other people’s debt? I may be wrong, but I’m certain the answer is a resounding “no.”
Thanks for the comments Ryan! I agree, 501(c)(3) may not be the best route, but I’m reading the exempt purposes in the Internal Revenue Code and it does state that charitable includes “relief of the poor, the distressed, or the underprivileged” and “advancement of education” and “lessening the burdens of government.” It’s certainly interesting. I just don’t see a for-profit company being successful at winning over any potential donors.
I like your idea of an agreement upon payment of loan balances, but then it goes back to your first point, there are just too many ‘what ifs’ and ‘how would this really work’ that it just seems like a pie in the sky idea. Something needs to happen to change the education debt problem we’re facing, though.
There is one organization, Building America’s Foundation, that tried but just as “IRS tax-exemption application talks were going very good and just as we were reaching the end of our review the IRS agent informed me that the current rules in congress forbids granting assistance to college graduates and individuals that have dropped out of college.” I think people would be more willing to donate if their donations can tax-exempt. I think people would give. There are people with a lot of money who want to give it away to the less fortunate (like Warren Buffet) but I think Congress is what is standing in the way of that. The government, universities and other for-profit organization make a lot of money from this crisis.
I think BAF could have made a bigger difference if it was marketed the right way to right people but unfortunately it gained enough traction in last 3 years and the founder decided to fold. But here is the site if you want to take a look. http://www.payoffthestudentloan.org
I think with a really good video it could have won the attention and care of millennials who are dealing with debt presently and could have eventually gone viral and won the support of many. I really hope something like is resurrected and that more is done to help prevent students from incurring student loan debt in the first place.
Hi Amoi. Thanks for sharing. I think things definitely need to change in Congress to allow for tax-deductible giving towards people’s student debt. It’s way too complicated!